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AEA Strategic Plan 1993
Alaska Energy Authority STRATEGIC PLAN January 1993 RW, BECK MANAGEMENT SERVICES (OAS ALASKA ENERGY AUTHORITY STRATEGIC PLAN TABLE OF CONTENTS Section Page “TV alble OS C ORG OM ES ceca ce so cxn cesses se cov snes wns once rn cav sous ss Se vmv ow soca n rs ones cnnaa oueearensces i List Of Tables...........:.ccsescssssesesescssesesessecescseseeseseesesesssseseeceseseeeseseecesescsceseseseeacseeseeeeseescseeaeees ii LASE Of Fig UTS ss seccscevensascssenecevenscssscsacasaswsisc sasasseusstuigeueatsisensatatiipaswstsustsasastewiooaasaeatntwesasee® iii Executive SUMIMALY ........ccssesssssssesesssesesesessesesesesesesesesesesesesessseseeeenensssessenseeesesseeeseseneaeeanes 1 I. Introduction sane TT. Situation Anal ySis..........ccsessssessssssesssseseesessssesesssseesssessssesseseescsesscsseaeensaeeesnsnensaneneaeenees 6 A. ASSUMPHONS.........csesesecsesesesesesesesenecseseseseseseseseseneseseseseseseseacseseseeeeseseeceecseseneeees 6 B. Background =e C. Issues Facing Alaska's Energy FUuture...........ccssssssssssssesssseeeseeenenenenenensncneneees 11 TIL. Mission Statement .........ccccccssssesesessesesesseseesesesesssseseecesesssseseseeecseseseeseseseeeeeeeneeseseeeesees 13 UV x, VASIOR esses vn suasnonuce-aasonstueztneseecsqouneseesuortusasstoqesescssevaseenssecaentsssessevssiseeassseuesasussnsseenesesaae 14 Vs, (GOals ANG @DjCCU VCS vsccssaravceccacsaasens seazasovscsacsssssassessvs sossusesvssussseususasasessesdnsucuvscasatosesass 15 Goal One—Transitioning to AEA's Future Rolle.........:.ccccscsssessseseseesessesesenenensesees 16 Goal Two—A Self-sustaining Electric Utility Industry .........::sessssssseeeseeeeeeseees 17 Goal Three—Qualified Electric Utilities Serving Alaskan Communities .......... 18 Goal Four—Affordable Electricity for Alaskans ...........s:ssssssessssseeeseseeeeeneeeeneneees 19 VIL. Strate gies..........sscssssesssasssesssscssncnssssesncnssssesssecnensassnsseneassssssesasoenssssnsaesesesasnensnsseosasasesess A. Organization B. Encourage Regional Utilities for the BUSN.............sssssssssseessseessessseesseesseees 40 Appendix 1. The Alaska Energy Authority..........scsscssssssssssseneesssseeeseneeeeneneeesncaeeseees 42 A. Responsibilities Matrix..........c.csssessssessssesessesseseescseensseescsesacensnesnenesesseneneeaseenees B. Outline of AEA Activities ..........ccssecsssessssssesessesesesessenenssesseseneesseneneneneeeneees C. AEA Programs and Services D. Other State Agency Energy Programs ..........::s:ssssssssssesesecsssseseeeeeseneneeeneeeenees 62 Appendix 2. Interviewees .........ccscscsesssssessssseeseeessseseseseseseseseseseseecseseaeseseseneaecenenenseeeeeees 65 Appendix 3. Proposed Financial Restructuring Plan............ccscssssssssesssseseneneneneneeeeneeees 67 R. W. BECK AND ASSOCIATES PAGE i ALASKA ENERGY AUTHORITY STRATEGIC PLAN List OF TABLES Table Page Number Title Number 6.1. Alaska Energy Authority Organizational Option Complete Dissolution...........ccccccsesessesesesesesssseseseseseseseeneneneseseacsesesesesceseeneaeeees 22 6.2 Alaska Energy Authority Organizational Option ABA Becomesal Division Of AIDE A tr cscrcecsrscscrsssacersrensressctsesseeceenenscecessseess® 24 6.3 Alaska Energy Authority Organizational Option Replace AEA with a Joint Action Agency ........:.cccssssssssesessesesesesestsseseseseenes 27 6.4 Alaska Energy Authority Organizational Option Basic AEA Organization Remains Unchanged...........s:ssssssssssessesesseseessseeses 28 6.5 Alaska Energy Authority Organizational Option Basic AEA Organization Unchanged with Expanded Board (Of DirectOrstrsccscrsrecccreccrccsserescesssrescssesssvessevasesecsecssereessecessscecerversatesseses 29 6.6 Alaska Energy Authority Organizational Option AEA Becomes a Member of an Alaskan Joint Action Agency .........:.::000+ 33 6.7 Alaska Energy Authority Organizational Option Move AEA to Department of Community and Regional Affairs............... 34 6.8 Alaska Energy Authority Organizational Option Reduced Size and Responsibilities for AEA ...........::scssscsssesessseseseseseeseseseseee 35 6.9 Alaska Energy Authority Organizational Option Separate Bush from Urban/Rural Programs .........s:ssssssessssesessssesssseseeseseesees 36 R. W. BECK AND ASSOCIATES PAGE ii ALASKA ENERGY AUTHORITY STRATEGIC PLAN LIST OF FIGURES Figure Page Number Title Number Lol Sita te BiG PANTING; Pl OCOSS sxexsrscaentnsecesecesesesemesoucnsecrcesescererereresssersmmim nest seerras sas 4 6.1 Alaska Energy Authority —- Organizational OptionsS.............cccssesseseeeeees 21 6.2 Alaska Energy Authority — Utility Industry Relationship — Currently ..........cccccccccsesessssseseseseeeeeesesesescseseseseseseseeseseecseseneeees 32 6.3 Alaska Energy Authority—Utility Industry Relationship — As Part of aJAA... Oe 6.4 Organizational Options vs. Goals .........scssesseeeseseeseneeneneeneneeteneenenenteneneenens 38 R. W. BECK AND ASSOCIATES PAGE iti EXECUTIVE SUMMARY This strategic plan for the Alaska Energy Authority is based on the premise that there will be decreasing oil revenues for future development and maintenance of energy systems in Alaska and that there are no near-term alternatives to replace these revenues. However, the need for reasonable cost energy persists—to support economic development and to advance the quality of life of the citizens of the State. New opportunities in energy development are accruing on the national level. Energy will experience renewed emphasis arising from the passage of the 1992 Energy Policy Act and through a reinvigorated Department of Energy under the Clinton/Gore team. Opportunities will be available for the State in areas of new energy technologies driven by the Nation's desire for energy independence and environmental concerns. The electric utility industry in Alaska needs to achieve a greater degree of financial self reliance—the industry needs to stand on its own financially, not being dependent upon State subsidies for either operations or capital improvements. The State of Alaska will not elect a purely cost driven structure to determine what consumers of small rural and bush electric utilities must pay. There continues to be a need for the development of the basic infrastructure, including electricity. Some political and economic means will be found to cushion the adverse economic and social impact of high-cost electrical service to these areas. There are four areas that have been emphasized in this strategic plan: 1. Transitioning to AEA's Future Role 2. A Self-sustaining Electric Utility Industry 3. Qualified Electric Utilities Serving Alaskan Communities 4. Affordable Electricity for Alaskans Two core strategies are developed to meet the goals and objectives that have been developed to address the above areas of emphasis: 1. Establishment of the proper organization to best address Alaska's energy needs, particularly electric systems. 2. Transfer the responsibility to serve bush Alaska to qualified regional utilities prepared to serve the needs of small communities. R. W. BECK AND ASSOCIATES PAGE 1 ALASKA ENERGY AUTHORITY STRATEGIC PLAN The strategic plan suggests a bold departure for the Alaska Energy Authority. A strategy is developed to establish a joint action agency (JAA) in Alaska. A Statewide joint action agency would be comprised of members made up of Alaskan electric utilities and the AEA, who would benefit in various ways from the negotiated terms of its formation. A new vision for the AEA redefines its purpose to better meet the changing conditions within which it now operates. A joint action agency is an organization formed by two or more entities for the financing, construction, and/or operations of electric generation and transmis- sion facilities. JAAs are widely used in the Lower 48 and have been formed to: ¢ assure an adequate supply of power, e achieve economies of scale, e¢ maintain reasonable rate levels, and * to reduce the need for capital by any one entity. It is contemplated that existing State-owned power production and transmission facilities would be operated and maintained and project revenues collected and utilized through the JAA. The JAA would be responsible for coordinating and financing the construction of new facilities, most particularly, the Railbelt and Southeast Intertie transmission projects. The JAA would also function to perpetuate a fixed level of Power Cost Equalization (PCE) funding, through administration of the AEA Financial Restructuring Plan, without having to draw from State General Fund allocations on a year-by-year basis; and under certain conditions administer grants for the improvement of energy facilities. A fairly narrow window of opportunity exists in the 1992-1994 time frame for putting all the elements together for implementation of this plan. We solicit your careful reading, evaluation, and understanding of this Strategic Plan for the Alaska Energy Authority. R. W. BECK AND ASSOCIATES PAGE 2 |. INTRODUCTION The Alaska Energy Authority (AEA) was created by the Alaska Legislature in 1976 to promote, develop, and advance the general prosperity and economic welfare of the people of Alaska by providing a means of constructing, acquiring, financing, and operating power projects and waste energy recovery facilities. The State of Alaska has a continuing need for reliable, cost-effective, and envi- ronmentally acceptable energy. Given the current status of AEA's projects, programs, and impending budgetary constraints, its Board of Directors has determined it is time to re-examine the Authority's mission, goals, and objectives. Alaska's energy development environment is unique. There are three major geographic areas: the urbanized South Central Region (The Railbelt), the devel- oped communities of Southeastern Alaska, and the small isolated bush commu- nities. Economically, the energy development environment is at a turning point—initially funded through oil revenues, the State's ability to fund energy development is becoming much more restricted as these revenues taper off. However, the ability to develop new competitive energy sources may well be the foundation for the State's long-term economic future as other world resources are pushed to their limits. Through a competitive process, R. W. Beck and Associates was selected by the Alaska Energy Authority to assist in developing its strategic direction as it faces the inevitability of significantly reduced State funds. The strategic challenge is how AEA can best meet the Railbelt utilities' desire for continued State financial support for electric system infrastructure, as well as the need for electric rate relief in bush and rural Alaska. The role of AEA and its structure for the decade of the 90's is the subject of this Strategic Plan. The foundation for this strategic plan was established through documentation reviews and interviews with approximately sixty people having specific knowl- edge regarding the energy situation in Alaska. The interviewees included legislators, state and local government executives, utility managers, energy economists, and consumers. The strategic planning process used in this plan is shown in Figure 1.1. The mission statement, derived from relevant State statutes, provides the purpose for the agency and drives all its activities. The mission and the environment in which the AEA works set up issues that will be addressed in this plan; together R. W. BECK AND ASSOCIATES PAGE 3 at ALASKA ENERGY AUTHORITY STRATEGIC PLAN they influence the vision people hold regarding the role of the AEA in the future—we have attempted to create a shared vision that can be supported by the many people knowledgeable of the energy issues in Alaska. Organizational goals emanate from the vision statement; goals are treated as enduring state- ments that amplify upon the mission statement and focus the Authority's efforts. Objectives define specific activities to be accomplished and are quantified, to the extent possible, so managers can measure performance toward attaining each objective. Figure 1.1 Strategic Planning Process There is usually more than one way to accomplish an objective; these alterna- tives are often of strategic significance. Management seeks strategies that give them an advantage—be it a competitive advantage or otherwise that allows them to accomplish their business in a way that is significantly better than other alternatives. This plan addresses the areas having the most strategic impact on the future of the AEA, and presents conclusions why a specific strategy is selected. There is a final step in the strategic planning process that is outside the time frame and, hence, scope of this project. Action plans are the bridge between the strategic plan and the annual operating plan and budget. Often the policy makers will set objectives that cannot be met because of resource constraints— manpower, available funds, equipment, and, in the case of governmental entities, political capital. Action plans offer a means to assign responsibilities, define tasks to be accomplished, and to define resource requirements. It is incumbent upon management to let the policy makers, who are setting objec- tives, know that an objective cannot be reasonably met with existing resources. Then, the objective should be modified or additional resources should be made available. Objectives, once approved, become the yardstick to measure an organization and its management's performance; unobtainable objectives serve little purpose. R. W. BECK AND ASSOCIATES PAGE 4 ALASKA ENERGY AUTHORITY STRATEGIC PLAN The Strategic Plan is presented in five sections: e Situation Analysis ¢ Mission Statement e Vision ¢ Goals and Objectives ¢ Strategies Appendix 1 is a description of the many ways in which the State of Alaska assists in energy related areas. Appendix 2 lists the specific energy-related services provided by the AEA. Appendix 3 lists the individuals interviewed during the foundation-setting portion of the strategic planning process. Appendix 4 presents the AEA's Proposed Financial Restructuring Plan. R. W. BECK AND ASSOCIATES PAGE 5 Il. SITUATION ANALYSIS A. Assumptions The foundation for this strategic plan was established through documentation reviews and interviews with approximately sixty people having specific knowl- edge regarding the energy situation in Alaska. The interviewees included legislators, state and local government executives, utility managers, energy economists, and consumers.! Several assumptions have been made regarding the economic, political, and social conditions under which the AEA operates. The six key assumptions underlying this analysis are: 1. The decline in royalty revenues from Prudhoe Bay oil will decrease the amount of State monies available for energy projects. Declining State revenues will force a cutback in State funding of both the development of new energy projects and power cost subsidy programs. 2. The electric utility industry in Alaska needs to achieve a greater degree of financial self reliance—the industry needs to stand on its own financially, not dependent upon State subsidies for either operations or capital improvements. 3. The State of Alaska will not elect a purely cost driven structure to determine what consumers of small rural and bush electric utilities must pay. There continues to be a need for the devel- opment of the basic infrastructure, including electricity. Some political and economic means will be found to cushion the adverse economic and social impact of high cost electrical service to these areas. 4. There is a need for economic development in the State to replace Prudhoe Bay oil revenues. Value added processing of the State's natural resources will require energy. There will be a con- tinuing need for coordination between the AEA, and other State 1See Appendix 3, Interviewees. R. W. BECK AND ASSOCIATES PAGE 6 ALASKA ENERGY AUTHORITY STRATEGIC PLAN agencies involved with new _ industries, utilities, and infrastructure development. 5. New opportunities in energy development are accruing on the national level. Energy will experience renewed emphasis arising from the passage of the 1992 Energy Policy Act and through a reinvigorated DOE under the Clinton/Gore team. Opportunities will be available for the State in areas of new energy technologies driven by our Nation's desire for energy independence and environmental concerns. 6. Coordination with federal agencies will to be vital to the success of energy development in the State. B. Background? The Alaska Energy Authority, as the State's primary energy agency, has been working in partnership with the municipal and private sectors to help provide the consumers of the State with dependable, affordable energy. The Alaska Legislature originally created the Alaska Power Authority as a public corpora- tion in the late 1970's with a statutory mission to: promote, develop and advance the general prosperity and economic welfare of the people of Alaska by providing a means of constructing, acquiring, financing, and operating power projects and facilities that recover and use waste energy. Since then, the State energy policy has focused on assisting communities and utilities in maximizing locally available generation options, improving system efficiencies, and most importantly, reducing the long-term costs of power for electrical customers. On July 1, 1989, the name of the Alaska Power Authority was changed to the Alaska Energy Authority to more accurately reflect the agency's increased and diversified responsibilities for energy matters. During the 1980's the Authority invested approximately $1 billion in hydro- electric plants, waste heat systems, and transmission lines. Its long-term debt is $375 million. Now with major capital construction decreasing under the energy program for Alaska, the Authority has increasingly focused its attention on the operation and maintenance of the larger systems it owns and on numerous rural electrical Portions of this discussion have been extracted from Alaska Energy Authority, Board of Directors Briefing, January 1991. R. W. BECK AND ASSOCIATES PAGE 7 ALASKA ENERGY AUTHORITY STRATEGIC PLAN utilities including those receiving State assistance through the Power Cost Equalization (PCE) program that it administers. The Authority looks to program revenues generated from its existing projects and to funds from commercial markets to finance projects before requesting State General Fund appropriations. 1. Owned and Operated Facilities The Authority oversees the commercial operation and maintenance of facilities it has constructed or acquired. Principally, these are the hydro- electric facilities serving the cities of Wrangell, Petersburg, Ketchikan, Kodiak, Glenallen, and Valdez, collectively known as the Four-Dam Pool, and a 170-mile portion of the transmission line intertie between Anchorage and Fairbanks. The latest major project, the 100+ megawatt Bradley Lake Hydroelectric Project near Homer went into commercial operation in September 1991, providing energy to the Railbelt, serving the Kenai Peninsula, Anchorage, Matanuska-Susitna area, and the Fairbanks area, through six electric utilities. The Authority is now awaiting passage of federal legislation so it can acquire the federal Snettisham hydroelectric system serving the Juneau area. 2. Electricity for Rural Alaska Alaska, more than any other state, has a large number of isolated communities not connected by electric transmission systems. For the most part, these communities are dependent on stand-alone diesel-powered generators for the production of electricity. There is great disparity between the cost of power in these rural communities and the cost of : power in communities in the Railbelt or those served by any of the State's major hydroelectric power plants. In rural areas, electric generation and distribution are frequently anti- quated and hazardous. What passes for electric service in rural Alaska resembles that seen in many other states 60 years ago and today in third- world nations. During recent years, the Authority has placed increasing emphasis on programs that meet the unique needs of Alaska's rural energy producers and consumers by promoting good operations and maintenance practices in rural utilities. The Authority is also investi- gating the possible application of solar, wind, fuel cell, and battery systems as substitutes for diesel generators in rural communities. R. W. BECK AND ASSOCIATES PAGE 8 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 3. | Why is the State in the Energy Business? The State is in the energy business to invest in energy infrastructure to promote economic development and the effective, efficient, and environ- mentally sound use of energy resources to provide residents with stable, least-cost electrical power. Electrification of rural areas took place in the Lower 48 by means of federal grants and low interest loans through the Rural Electrification Administration (REA), the Tennessee Valley Authority (TVA), and similar agencies. Early on, the federal government realized the importance of electricity to economic development, and realized that the initial capital cost of electrification was too high to be borne at the outset by the individual consumer. Therefore, the costs and benefits of electrification should properly be borne by all members of society through the use of government funding of infrastructure. Federal money was used to build large dams and transmission facilities in the Lower 48, at little cost to the consumer. Alaska missed out on the early electrification drive which took place prior to statehood except for the federal Eklutna and Snettisham hydroelectric projects and low interest loan programs under REA. Currently, there is very little federal money available for electrification. Also, the method used in the Lower 48—building transmission lines to create large, efficient, interconnected systems—would work in only limited areas of Alaska, such as the Railbelt. The cost of developing reliable electric power systems in Alaska is extremely high, in large part because of the large distances between communities which have small loads. Rural and bush electric utilities face high operating costs because of their small isolated loads. There are approximately 80 small electric utilities in the State that serve less than 200 customers. Because of the high costs and reluctance of outside financial markets to consider proposals from smaller entities, State funding, either through loans or grants, has been considered to be the only way to develop reliable power systems in many parts of Alaska. The demands of dramatic infrastructure growth in the 1970's also created a need for Statewide energy planning to bring about a match between development of available resources and the need for State investment because conven- tional project financing was only available for terms shorter than the expected life cycle of the facilities. For example, a hydroelectric facility may last 50 to 100 years, but the maximum term on borrowed funds, or for the recognition for amortization of costs, may be no more than 30 to R. W. BECK AND ASSOCIATES PAGE 9 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 35 years. Similarly, transmission lines may last 50 years but are usually conventionally financed for only 20 years. As long as it remains true that electricity is a necessary component of the future economic development of Alaska, and as long as the early year costs of that electricity are prohibitive for the individual consumer, the State must support the energy business to accommodate economic devel- opment and the well being of its people. This basic premise is reflected in the Alaska Energy Authority enabling legislation. The Authority has funded the development of power systems through construction of projects to provide wholesale power and to improve the availability of power, through grant and loan programs and through provision of technical assistance to communities seeking to develop or improve their local power systems. With the moral obligation of the State, the Authority has the ability to issue bonds at a lower interest rate than utilities might be able to achieve for themselves and the Authority has used its bonding ability to assist utilities in their development of power systems. As a part of its goal to seek stable, least-cost power sources for current needs and future economic development, the Legislature has also funded the development of State alternative energy sources and the promotion of energy efficiency and conservation. However, attaining significant results can be expensive. Corporations and individuals often are unwilling to pay the high costs of developing or adopting alternative technologies without government funding because of the uncertainties of return. The State, however, is not only motivated by profit nor rates of return. While in the short run, alternative energy and conservation programs may not have traditional cost effectiveness nor be as financible, the long- term benefits outweigh these limitations. Successes include the applica- tion of waste heat recovery technology to small rural power plants in the early 1980's, with the result that this has become an accepted and sought- after technology today. On the other hand, there have been clear failures in the attempts to demonstrate the use of wind energy in rural Alaska. 4. The State in Transition Now in the decade of the 90's, the State of Alaska once again finds itself in transition. The boom of the 70's and 80's was fueled largely by the revenues from royalties and taxation on petroleum production on the North Slope. As the recoverable oil reserves decline, so does the potential for the major source of State funding. The ability of the State to continue to invest (spend) in energy related projects has to be examined along with all other areas of State governmental support. , R. W. BECK AND ASSOCIATES PAGE 10 ALASKA ENERGY AUTHORITY STRATEGIC PLAN There is a window of opportunity to achieve greater financial self- sufficiency for the long-term, whereby the AEA could (with legislative concurrence) use the Railbelt Intertie Reserve Fund, along with short-term budget support, to annuitize all remaining programs at a preestablished level. Defining the role of the Alaska Energy Authority, and its organizational structure for this coming decade, is the issue at hand. C. Issues Facing Alaska's Energy Future Strategic issues are elements which, if not addressed, can seriously limit the success of an organization. During the development of this plan, a number of issues were identified through the interview and document review processes which have a bearing on the implementation of the plan. ISSUES 1. Power Costs There are wide differences across the State in the price of electricity. The price of rural and bush electricity is substantially higher than in urban areas, even net of Power Cost Equalization (PCE) offsets in rural and bush Alaska. High cost rural and bush electric power is now subsidized by the State. Total subsidies over the past ten years for PCE and its predecessor programs have amounted to approximately $154 million, which is currently funded on an annual basis by the Legislature from the General Fund. 2. Intertie Funding A past legislature established a "Railbelt Intertie Reserve" fund. The current balance of funds in this reserve account stands at about $90 million. The Railbelt utilities believe that this remaining amount should be used to fund intertie construction in the Railbelt. 3. State's Role There is no consensus about the ongoing role that State government should play in the electric energy future of Alaska. Opinions vary from having the State as the principal owner and operator of base load facili- ties, all the way to a virtual "hands-off" approach. There remains a question regarding how the agencies of the State should be best organized to coordinate the service delivery to the bush for infra- R. W. BECK AND ASSOCIATES PAGE 11 ALASKA ENERGY AUTHORITY STRATEGIC PLAN structure development. So many of the basic services such as schools, telephone, and water and sewer systems require electricity. There is a need for more integrated planning and execution between, for example, AEA, DEC, and DCRA. With the renewed interest by the federal government in energy programs, there is a need to establish a solid working relationship with those agen- cies providing grant monies for energy projects of value to Alaska and to work with the State in technology transfer efforts. 4. Increased Reliability There are growing expectations for higher reliability of supply, not only in the more developed urban areas, but for rural systems as well. 5. Financial Self-sufficiency for the Electric Power Industry There is some agreement on attempting to get individual communities to a point where they do not require a significant degree of subsidization. There is less agreement as to how this should be achieved. 6. Operational Efficiencies AEA now operates its facilities through a combination of contracts with local utilities near the facilities, or through Authority employees either assigned to the facility or through a circuit rider program. This method of multiple small contracts is inefficient and lacks quality control. A better method of integrating these operations and maintenance activities could result in lower costs, increased reliability, and better trained personnel. R. W. BECK AND ASSOCIATES PAGE 12 Il. MISSION STATEMENT A mission statement for an organization includes the purpose and values of that enterprise. The mission statement articulates in an enduring way, the reason for the very existence of an organization. It clearly states who the beneficiaries should be, and the nature and quality of what the enterprise can provide in a manner better than any other type or form of similar entity. The statement of purpose sets the direction for the enterprise. The values, the shared beliefs of members of the enterprise, define the criteria to be used in the development and management of the enterprise's strategies for meeting its objectives. The present statutory mission of the Alaska Energy Authority is: to promote, develop and advance the general prosperity and economic welfare of the people of Alaska by providing a means of constructing, acquiring, financing, and operating power projects and facilities that recover and use waste energy. To better meet the changing needs of the State, the electric utility industry, and the consumer, the Mission Statement needs further modification to clarify the AEA's future role.’ The changed emphasis reflects less specificity regarding acquiring, constructing, and operating leaving a stronger emphasis in planning and financing. An alternative statement, which best reflects the present focus, given this plan's assumptions and identified issues, is: Mission The Alaska Energy Authority advances the quality of life and economic welfare of the people of Alaska by planning and assisting in the financing, development, and operation of effective, efficient, and environmentally sound energy systems and conservation programs that provide safe and dependable energy at reasonable cost. R. W. BECK AND ASSOCIATES PAGE 13 IV. VISION A vision statement puts into words the picture held in the minds of an organiza- tion's primary stakeholders as to what its future can and should be. The vision statement, below, sets forth those positions of strategic importance that can be better accomplished by the AEA than any other organization—and the manner in which it will accomplish its mission. Vision Statement The Alaska Energy Authority will move away from its initial role as designer, construc- tor and operator of Alaskan wholesale power resource facilities, to one of quality assurance of operating systems and assisting in future project financings. The AEA will be seen as the strong sponsor and participant in a process that leads to the qualification of regional utilities to serve bush Alaska. Larger utilities will look to the AEA as the State agency for bringing organizations together to proceed with worthy generation and transmission-intertie projects, not otherwise feasible for any one utility. The AEA will be available to the financial community as the agency best equipped to pull together diverse interests in assuring the economic feasibility and viability of future projects, and obtaining least-cost financing. The AEA will be seen as a leader in energy systems planning and a coordinator of federal energy programs serving Alaska. AEA will be the conduit for energy-related federal funding. The AEA will be seen by its employees as providing a challenging and rewarding work environment. Members of Alaska State government will come to view management and employees of the AEA as valued and respected experts in the fields of energy technology, and power facility financings. As time goes by, the AEA will become more identified as being part of the electric industry in Alaska, rather than an agency of State government, as the industry assumes an ever increasing role in Statewide energy systems planning and development. R. W. BECK AND ASSOCIATES PAGE 14 V. GOALS AND OBJECTIVES Goals and objectives define the way in which an enterprise accomplishes its mission. Goals expand on the mission statement. Although more specific, they are still broad statements of the organization's aspirations for the future. They are generally timeless, enduring, and often not measurable in quantitative terms. Objectives are achievements that are specific and measurable—or at least can be assessed. They are internally focused, indicating desired results for specific internal organizations and people. Performance against these objectives will be the primary indicator for judging whether the Authority's goals are being achieved. Since objectives, once approved, become the yardsticks to measure manage- ment's performance, consideration must be given to the constraints under which the AEA operates. The four areas of emphasis within which goals were developed represent the core of this strategic plan: Transitioning to AEA's Future Role A Self-sustaining Electric Utility Industry Qualified Electric Utilities Serving Alaskan Communities Affordable Electricity for Alaskans. PY nN R. W. BECK AND ASSOCIATES PAGE 15 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Goal One—Transitioning to AEA's Future Role The needs of the electric utilities in Alaska are changing. It is now timely to consider a dramatic change in the State's role regarding the provisioning of energy systems, the role of the AEA, and Statewide electric system planning and financing. GOAL ONE To provide Statewide energy policy development and planning, project financing, fiduciary oversight, and governmental agency coordination. 1.1 1.2 1.3 1.4 15 1.6 1.7 1.8 OBJECTIVES Phase out the design and construction functions of AEA by Decem- ber 31, 1994. Increase the effectiveness and efficiency of AEA-owned facilities ’ through consolidation of the management, operations, and mainte- nance functions by December 31, 1994. Develop a plan for transitioning the circuit rider program activities for communities supported by the AEA to qualified utilities by December 31, 1993 and initiate the implementation of the plan July 1, 1994. Transfer ownership of AEA assets to qualified utilities following repayment or assumption of all AEA project debt. Also Objective 2.2. Continue the role of coordination and facilitation of future bond financings. Also Objective 2.3. Establish an Energy Technologies Group by September 1, 1993 to facilitate technology transfer of proven energy concepts. Establish a program by December 31, 1993 to obtain federal funding of energy projects. Develop a plan to adjust AEA's organization, staff size and skill mix to match the evolving role of the Authority as outlined in this Strategic Plan by December 31, 1993. R. W. BECK AND ASSOCIATES PAGE 16 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Goal Two—A Self-sustaining Electric Utility Industry The Alaska Energy Authority has played an important role in the development of electric systems in the State. With reduced State revenues, now is the time to begin the transition to a more self-directed and self-financing electric utility industry. Achieving this goal may require ten years or longer; but a start should be made now. GOAL TWO To promote a self-financing electric utility industry in Alaska—not dependent upon State funding. 2.1. 2.2 2.3 2.4 OBJECTIVES Obtain legislative authority for the AEA Financial Restructuring Plan by the end of the 1993 legislative session. Transfer ownership of AEA assets to qualified utilities following repayment or assumption of all AEA project debt. Also Objective 1.4. Continue in the role of coordination and facilitation of future bond financings. Also Objective 1.5. Assist electric utilities in developing interorganizational relationships by December 31, 1993 to plan, finance, and develop future generation and transmission systems. R. W. BECK AND ASSOCIATES PAGE 17 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Goal Three—Qualified Electric Utilities Serving Alaskan Communities Many smaller communities continue to rely on the AEA to provide fuel purchase loans, provide generation equipment, and maintain and operate their systems. The effort in this goal area is to transfer these services to qualified utilities and to assist in establishing such utilities if there are none properly located to serve the local communities. GOAL THREE To encourage and facilitate the development and expansion of qualified electric utilities to serve Alaskan communities. 3.1 3.2 3.3 3.4 3.5 OBJECTIVES Develop a data base of electric utility capabilities for each Alaskan community by December 31, 1993. Develop and establish Statewide qualification standards for generation, transmission, distribution, metering, billing and collection, and business administration by local and regional utility operations in order for them to be eligible for State financial assistance. Solicit utility industry input in the preparation of these standards. Adopt qualifica- tion standards through appropriate legislation and/or AEA Regula- tions by July 1, 1994. Promote and facilitate regional electric utilities to serve bush and rural Alaska where existing, self-supporting utilities do not exist. The eligibility for a community to participate in the Power Cost Equaliza- tion (PCE) program will be linked to receiving service from an AEA- qualified utility by July 1, 1995. Develop a plan for transitioning the circuit rider program activities for communities supported by the AEA to qualified utilities by December 31, 1993 and initiate the implementation of the plan July 1, 1994. Continue to improve the bulk fuel supply to rural and bush Alaska by coordinating bulk fuel purchases by utilities, providing low-cost loan funds for advance purchases of bulk fuel, and providing both technical and financial assistance to remediate bulk fuel storage deficiencies. Develop a bulk fuel remediation plan by December 31, 1993—target fifty percent compliance of all village bulk fuel storage facilities by July 1, 1997 and eighty percent by July 1, 2001. R. W. BECK AND ASSOCIATES PAGE 18 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Goal Four—Affordable Electricity for Alaskans Affordable electric rates for Alaskans are a basic requirement for economic development and a reasonable quality of life. This goal is oriented toward attaining a level of electric energy costs that can be reasonably affordable by Alaskans wherever they chose to live. GOAL FOUR To achieve and maintain reliable electric service in Alaska at costs that are not disproportionately higher in bush and rural areas than in urban areas—without relying upon annual State legislative appropriations. OBJECTIVES 4.1 Work with the Alaska Legislature and the Alaska Public Utilities Commission (APUC) to revise and update the Power Cost Equalization (PCE) program to provide incentives to local utilities to invest in energy efficiencies and operational cost reductions, thus reducing the overall need for PCE funding. Build in the planned gradual phasing out of all such subsidies in order to further encourage eventual self- sufficiency. Tie the eligibility for PCE to a community's affiliation with an electric system service provider that meets the qualification standards developed under Goal Three. Have such legislation in place by July 1, 1994. 4.2 Secure the means to annuitize the funding of the PCE program through legislative and executive branch approval of the AEA Financial Restructuring Plan by the end of the 1993 legislative session in order to eliminate the need for annual appropriations. 4.3. Establish objective criteria for utilities to receive electric system devel- opment and betterment grants. Adopt such criteria through appropri- ate legislation and/or rule-making by July 1, 1994. R. W. BECK AND ASSOCIATES PAGE 19 VI. STRATEGIES Having developed the mission, vision, and goals and initial objectives, the next step is to select a workable and acceptable set of strategies to accomplish the objectives that have been established, in a manner that does not exceed available resources. As mentioned earlier, it is sometimes necessary to adjust an objective if sufficient resources are not available to allow for a reasonable likelihood of successful accomplishment. The resources available to implement a plan are always finite and must be allocated in a way that recognizes other ongoing obligations of the organization. The resources available to a strategic manager are: ° financial, e plant and equipment, ° personnel, and e in the case of a governmental entity such as the AEA, political capital. Recognizing that financial resources for energy development will be constrained in the foreseeable future, the strategies of most importance to this plan will be those that shape the AEA to best meet its mission. The following two strategies are fundamental: 1. Establishment of the proper organization to best address Alaska's energy needs, particularly electric systems. 2. The transfer of the responsibility to serve bush Alaska to qualified regional utilities prepared to serve the needs of small communities. Each strategy will be discussed in the following sections. R. W. BECK AND ASSOCIATES PAGE 20 ALASKA ENERGY AUTHORITY STRATEGIC PLAN A. Organization Basically there are four states of being for the AEA, with variations, that cover the set of reasonable alternative organizations. The AEA can: al be dissolved, 2 remain unchanged, 3. be reduced significantly in size and responsibilities, or 4 organizationally, be divided into separate urban/rural and bush programs. Nine Organizational Options—The nine options that will be discussed are represented in the following diagram, Figure 6.1, Organizational Options. Each option is mutually exclusive except for the option to separate urban/rural from the bush. The discussion that follows describes each option and presents its strength and weaknesses. These strengths and weaknesses are with respect to the option's ability to provide services. As a separate criterion, Figure 6.4, Organizational Options vs. Goals, at the end of this section, rates the options with respect to the goals of this plan. Figure 6.1—Alaska Energy Authority Organizational Options -— 1. Complete Dissolution -— Dissolution |—;— 2. Transfer to AIDEA \— 3. Replace with JAA -— 4. No Change Current Organization No Change |—— 5. Larger Board | 6. Join JAA as Member a 7. Transfer to DCRA 8. Reduced Size & Responsibilities 9. Separate Bush from Urban/Rural R. W. BECK AND ASSOCIATES PAGE 21 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 1. Complete Dissolution If the Authority were to be dissolved, there would be some savings to the State provided the utilities and the local communities could satisfy their own electrical needs without outside assistance—financial or otherwise. However, this option has significant drawbacks such as: it may require refinancing of AEA bonds, the State would loose an important technical resource, any control of the evolution of bush electrical systems would be lost, and there might be a need to reestablish an Energy Office in the Department of Commerce and Economic Development (DCED) to admin- ister certain existing programs such as PCE, the Bulk Fuel Revolving Fund, or the Power Development Revolving Fund. The following table presents the strengths and weaknesses of this option. Table 6.1 Alaska Energy Authority Organizational Option Complete Dissolution Strengths Weaknesses Local control of assets through assumption of debt, sale, or transfer Eliminates conflicts over AEA- owned facilities May require bond refinancing or payoff Could increase electric power costs to consumers State would lose an important technical resource No Statewide focus on energy issues State assistance for bush elec- tric programs would have to be redefined R. W. BECK AND ASSOCIATES PAGE 22 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 2. AEA Becomes a Division of the Alaska Industrial Development and Export Authority A number of people in the State have suggested that the AEA should become part of the Alaska Industrial Development and Export Authority (AIDEA). Reasons given for this option include: e AIDEA is a major facilitator of debt financing e AIDEA now serves as the focal point for two electric projects—the Healy Clean Coal Project and the Unalaska Geothermal Project . The AEA board of directors is similar to AIDEA's ¢ Consolidation of State agencies could lower costs through improved efficiencies. AIDEA's Focus—While this is all true, the charter of AIDEA is to create and assist in the expansion of business in Alaska—its underlying purpose is economic development. The AEA is charged with developing State energy infrastructure. AEA would not fit within the AIDEA mandate. The differences in emphasis are significant. Proponents of this option suggest AIDEA's name be changed to Alaska Industrial Development and Energy Authority in order to reflect the shift in emphasis. The precedent has been set for AIDEA to own electric projects through its efforts to receive federal grant monies and to further fund and own the Healy Clean Coal Project (electric generation). Under this concept, there would be two divisions, each headed by an Assistant or Deputy Executive Director. Some of the AEA technical staff resources could serve both divisions; whether this is appropriate or not requires further review. The AEA staff has been tightly focused on energy issues, while AIDEA projects have been quite diverse; traditionally AIDEA has gone to industry or consultants for specialized support—this may continue to be its most effective mode of operation. While the option of AEA moving under AIDEA is a viable short-term option, it would not in the long run serve the best interest of either func- tion. The following table presents the strengths and weaknesses of this option. R. W. BECK AND ASSOCIATES PAGE 23 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Table 6.2 Alaska Energy Authority Organizational Option AEA Becomes a Division of AIDEA Strengths Weaknesses Consolidation of State agencies Adds technical staff to AIDEA Accommodates continuation of bush programs Places AEA in an agency witha large equity base Retains State capability to develop major electric projects Conduit for State funding of energy projects Requires statutory change Lack of "utility perspective" Diminishes electric utility input Weakens focus on energy projects Does not foster self-sufficient electric utility industry Reliance on State funding Unable to accumulate retained earnings Debt service requirement of AIDEA Politicalization of energy system development decisions R. W. BECK AND ASSOCIATES PAGE 24 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 3. Replace AEA with a Joint Action Agency This option suggests replacing AEA with an industry lead organization passing prime responsibility for the State's future electric system to a joint action agency. Definition—A joint action agency, formed to provide electric power and energy, has the following characteristics: e Participation by two or more entities in construction and operation of particular generating or transmission facili- ties as tenants in common. ¢ Entities agree to establish provisions for operation and maintenance of facilities. ¢ One participant is usually designated responsibility for specific projects. Approximately forty states have enacted statutes creating, or authorizing, the formation of joint agencies empowered to supply electric power and energy. There are sixty-four such joint action agencies throughout the country. Legislation—Enabling JAA statutes can be divided into two groups based upon whether a statute creates or authorizes the formation of joint agencies to specifically supply electric power and energy, or authorizes the formation of joint agencies to provide municipal services and facili- ties—which may include, but need not be limited to, the supply of electric power and energy. Joint agency statutes, with certain exceptions, provide for the organization of joint agencies as political subdivisions of the authorizing state and permit a joint agency to acquire, construct, own, and operate electric power supply facilities and to finance such facilities through the issuance of joint agency debt. In some states, cooperatives and investor-owned utilities, as well as municipal utilities, are eligible for membership in joint agencies. How- ever, participation by cooperatives tends to be the exception rather than the rule. In Alaska, cooperatives play a strong role in providing electric service and it is likely that they could dominate a JAA. This could pose legal problems since such a JAA may not be a public agency. Actually the range of activities entered into by various joint action agen- cies is quite broad and tailored to meet specific needs. Members of joint action agencies may not all be financial participants of each project under- taken by the agency, but broader membership provides for more R. W. BECK AND ASSOCIATES PAGE 25 ALASKA ENERGY AUTHORITY STRATEGIC PLAN integrated planning than could be possible if there were multiple joint ventures formed for specific projects. There are two means of creating a joint action agency which would include the Alaska Energy Authority, rural electrical cooperatives, and municipal utilities in Alaska. The first route is to enact legislation to permit creation of a State agency by agreement between the participant energy authority, municipal utilities, and the rural cooperatives. The joint action agency would be a public corporation of the State. Under the Alaska Constitution, to constitute a public agency of the State, the board of directors of the body must be appointed by the governor. Residence or utility industry membership could be a criteria for appoint- ment by the governor. The second method of creating the agency is by legislation exercising the joint powers authority under Article X, Section 13 to the Alaska Constitu- tion. Under provisions similar to these, joint action agencies have been created b: ~*.nicipal utilities in many states. In Alaska, electric coopera- tives dominate the industry. The federal tax implications of private electric cooperative participation have not yet been fully explored. Another alternative would be to create a joint action agency as a non- profit corporation. Property tax exemption and eminent domain powers could be added by law. Because of an uncertain federal tax picture, the entity should have management powers only and not hold property. In each case, legislation could authorize agreements to flesh out the details of the new entity. JAAs have been found to be very successful, however, it takes time for their roles to mature and they need leadership to help them move forward and to extend their areas of interest. Organizational Alternatives for AEA—Upon the creation of an Alaskan joint action agency, two variations manifest themselves: ° AEA is dissolved into a JAA Under the dissolution scenario, the AEA's functions, organization, and debt would be absorbed by a JAA; the AEA would cease to exist. ° AEA continues in existence as a participating member of a JAA and maintains all its responsibilities This alternative will be discussed under 6. Join JAA, below. R. W. BECK AND ASSOCIATES PAGE 26 ALASKA ENERGY AUTHORITY STRATEGIC PLAN AEA is Dissolved—Eliminating the AEA completely and replacing it with a new organization such as a JAA is a radical shift. The following table presents the strengths and weaknesses of this option. Table 6.3 Alaska Energy Authority Organizational Option Replace AEA with a Joint Action Agency Strengths Weaknesses JAA could be a recipient of AEA assets and associated debt Board of Directors drawn from member utilities Places responsibilities for elec- tric operations with the utilities Framework for utilities to enter into joint electric system plan- ning and future financings and development Eliminates cost to the State of funding AEA Promotes efficiencies through regional consolidation Provides a framework for the AEA Financial Restructuring Plan Reduces legislative influence in project development process for electric systems JAA will be able to accumulate retained earnings Foster self-sufficiency of the utilities i Requires statutory change Requires creation of anew entity Requires participants to desire to work together in a coopera- tive manner State assistance for rural elec- tric programs could be reduced or eliminated No Statewide focus on energy issues Limited Statewide projects May be a taxable entity R. W. BECK AND ASSOCIATES PAGE 27 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 4. Basic AEA Organization Remains Unchanged Maintaining the status quo is always an option. Under this alternative the AEA would remain in DCED and continue as it has since 1976. This scenario ignores the current pressures on AEA and will not be stable from the point of view of the Authority's own future. Furthermore, it does not consider the long-term well being of the bush electric systems—that could loose their PCE subsidy because of funding pressures facing the State or the urban/rural utilities that count upon the AEA for the funding of large systems. The following table presents the strengths and weaknesses of this alternative. Table 6.4 Alaska Energy Authority Organizational Option Basic AEA Organization Remains Unchanged Strengths Weaknesses Requires no action Current organization is not Keeps technical staff together suited for AEA's evolving role Retains capability to develop Reliance on State funding major electrical projects Unable to accumulate retained Allows for focus on Statewide Te energy issues Does not foster development Conduit for State funding of of self-sufficient electric utility industry Politicalization of electric system development decisions energy projects Lack of "utility" perspective R. W. BECK AND ASSOCIATES PAGE 28 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 5. Basic AEA Organization Unchanged with Expanded Board of Directors One of the major recurring comments made by the utilities is that the AEA lacks a utility perspective. This alternative keeps the AEA as it is today but expands the Board of Directors to allow for more industry input. Since there will be less State money to fund major projects, the reason for State representatives to hold a majority position is less compelling. A majority of the board, being appointed from the utility industry, could alleviate this concern. There is also the potential under this concept to have specialists on the board such as financial advisors or an executive from a major utility in the Lower 48. The following table presents the strengths and weaknesses of this option. Table 6.5 Alaska Energy Authority Organizational Option Basic AEA Organization Unchanged with Expanded Board of Directors Strengths Weaknesses Keeps technical staff together Retains capability to develop major electrical projects Reduces politicalization of elec- tric system development decisions Conduit for State funding of energy projects Provides for increased utility representation on the AEA Board Current organization is not suited for evolving role Reliance on State funding Unable to accumulate retained earnings Does not foster development of self-sufficient electric utility industry Reduces focus on Statewide energy issues R. W. BECK AND ASSOCIATES PAGE 29 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 6. AEA Becomes a Member of an Alaskan Joint Action Agency The joint action agency concept has proven itself in other states. Under the third option, a JAA would have replaced the AEA; however, that option has some drawbacks. The JAA concept for Alaska appears best when the AEA serves as a participating member. AEA as a JAA Member—Under this alternative the basic organization of the AEA does not change when it becomes a member of the JAA.3 The AEA would bring to a JAA the ability of the State to support future debt and technical personnel to serve as staff to the JAA. The support of the bush villages would continue from within the AEA until the objec- tives to have qualified local and regional utilities take over these respon- sibilities are met. Also, the AEA programs to foster energy related technology in the State could continue and efforts to coordinate with federal agencies and to obtain federal funding for projects would remain with the AEA. This alternative provides a clear structure to accommodate the AEA Restructuring Plan. A JAA could receive the initial funding of the AEA Financial Restructuring Plan as endowments—one time appropriations over the first few years as defined by the plan. The charter of a JAA could charge it with the responsibility to administer and fund the PCE payments for the prescribed period of time. Utility Membership—Utilities would join the JAA to receive the benefits of the endowment and the financing arrangements that they desire to build their respective projects. If, after the projects are built, a utility decides to withdraw from the JAA, it would still have the ongoing legal obligation to honor its commitments to purchase its share of the output of its project or to continue its debt service payment. If a utility earmarked for an AEA Financial Restructuring Plan project decides not to join the JAA, the allocated funds would be redirected. The formation of a JAA accommodates the desire of the utilities to have a stronger voice in electric systems project planning and development. Since the Board of Directors of a JAA is made up of representatives of its members, the utilities would be fairly represented. The composition of the AEA Board would not need to change, and appropriately so, because 3An explanation of the characteristics of a typical joint action agency appeared in Subsection 3, above. R. W. BECK AND ASSOCIATES PAGE 30 ALASKA ENERGY AUTHORITY STRATEGIC PLAN it remains a State agency with many functions not of direct or immediate interest to the JAA at-large. It is anticipated that the initial composition of the JAA would be the Rail- belt utilities, the Four-Dam Pool members, and the AEA. Other utilities would be encouraged to join. However the utilities benefiting from State assets or anticipating receiving capital assistance from the AEA Financial Restructuring Plan would be required to join in order to have a voice in decisions relating to their projects. It is a characteristic of a JAA that every participant does not need to be involved in every project; however, as the electric systems mature, and the grid is expanded, all the participants will want to take part in the widening planning function. JAAs tend to take on an expanding role as the participants become comfortable with their working relationships. For example, JAAs are now becoming prime movers in integrated resource planning for their members. Less State Involvement in Electric System Matters—It should be recog- nized that formation of a JAA does not add another State agency. While it will require enabling legislation, it is an organization created by its members for its members' benefit. In the long run, the formation of a JAA will lead to less State involvement in electric system matters and reduced State expenditures to support electric system. Under this option, the JAA could be the principal entity for Statewide electric system planning, moving a step closer to placing the responsibil- ity for all State electric operations with the utilities. This would not be unlike other states. AEA Interaction with Utilities—It became clear during the background interviews for this plan that the current AEA relationship with utilities is strained, for a variety of statutory and business reasons. The exhibit below depicts this condition. The AEA, while having the responsibilities of a utility, is managed and funded as a State agency. The net result is that AEA's communications with utilities are sometimes weak. On the other hand, the utilities only deal with the AEA when it is in their own best interest. R. W. BECK AND ASSOCIATES PAGE 31 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Figure 6.2 Alaska Energy Authority—Utility Industry Relationship Currently With the creation of a JAA, the AEA can become a full-fledged member of the utility community. While it remains a State agency, its focus will become more that of a utility industry participant. And, the JAA being an industry sponsored entity, will reduce government's responsibilities in electric system development. As shown in the diagram below, when the AEA becomes a member of the JAA, the communication lines will strengthen in both directions. Figure 6.3 Alaska Energy Authority—Utility Industry Relationship As Part of aJAA R. W. BECK AND ASSOCIATES PAGE 32 ALASKA ENERGY AUTHORITY STRATEGIC PLAN The following table presents the strengths and weaknesses attributable to the AEA being a member of an Alaskan joint action agency. Table 6.6 Alaska Energy Authority Organizational Option AEA Becomes a Member of an Alaskan Joint Action Agency Strengths Weaknesses Provides a framework for AEA Finan- Requires statutory change cial Restructuring Program Requires creation of a new Board composition drawn from JAA entity members Requires participants to desire Framework for utilities to enter into to work in a cooperative joint electric system planning and manner future financings and development May be a taxable entity Places responsibility for electric oper- Uncertain legal status ations with the utilities Cc ; annot issue tax-exempt Provides for Statewide focus on bonds energy issues Provides for support to the rural/ bush programs Promotes efficiencies through regional consolidation Reduces political influence in project development processes Reduces conflict over management/ control of AEA-owned facilities Fosters economic dispatch of intertied systems Mitigates construction and operating risks for development of new projects Keeps experienced technical staff together—AEA staff can work for the JAA Retains capacity to develop major electric projects Conduit for State and federal funding of energy projects R. W. BECK AND ASSOCIATES PAGE 33 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 7. Move AEA to Department of Community and Regional Affairs Another organizational option for the AEA would be for it to move under a different State department. A typical alternative under this option would be for the AEA to move under DCRA, either as it is today or as a member of a JAA. The possible advantage of this approach would be to place it administratively under the department charged with assisting communities throughout the State rather than a department charged with developing the economic base as is the responsibility of DCED. The following table presents the strengths and weaknesses of this option. Table 6.7 Alaska Energy Authority Organizational Option Move AEA to Department of Community and Regional Affairs Keeps technical staff together Conduit for State and federal funding of energy projects Places AEA in the department most concerned with local infrastructure Opportunity to combine support for small electric systems with water, sewer, and solid waste Current organization is not suited for evolving role Reliance on State funding Lack of "utility perspective" Unable to accumulate retained earnings Does not foster development of self-sufficient electric utility industry Politicalization of energy sys- tem development decisions Complexity of electric systems requires support from an organization dedicated to providing safe and reliable electric services R. W. BECK AND ASSOCIATES PAGE 34 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 8. Reduced Size and Responsibilities for AEA There are a number of ways in which the size and responsibilities of the AEA could be reduced. For the purposes of this analysis, limiting its responsibilities to the fiduciary actions associated with existing financial indebtedness offers a discrete scenario. This limited role could be accomplished by a small staff of people, reducing the AEA budget significantly. Rural and bush programs, if continued, would have to be handled by another organization. The rami- fications of such a separation of responsibilities is addressed under the next option. The strengths and weaknesses of this option are presented in the table below. Table 6.8 Alaska Energy Authority Organizational Option Reduced Size and Responsibilities for AEA Strengths Weaknesses e Reduces AEA budget Looses technical staff ¢ - Ease of implementation capabilities Could increase electric power costs to consumers No Statewide focus on energy issues State assistance for bush elec- tric programs would have to be redefined R. W. BECK AND ASSOCIATES PAGE 35 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 9. Separate Bush from Urban/Rural Programs The AEA performs a distinctly different role in its service to urban/rural areas of Alaska versus the bush. There may be merit to an organizational alternative that would place the portions of the AEA that serve each of these areas of concentration in separate organizations. A strategy to separate AEA bush programs from its urban/rural programs could fit within the context of any of the above options. For example, the urban/rural programs could fit into a JAA or remain as an independent authority as discussed above. The bush programs could remain as a mini-AEA or become a division of DCRA. Although feasible, these options do not lend themselves to the AEA Financial Restructuring Plan because of the separation of the functions. If the urban/rural programs portion of the AEA were separate, yet given responsibility to fund and administer PCE, the remaining costs to the State of administering other bush programs would be modest and might well be accomplished through a mini-AEA or as part of DCRA. The table below presents the strengths and weaknesses of this option. Table 6.9 Alaska Energy Authority Organizational Option Separate Bush from Urban/Rural Programs Strengths Weaknesses Places bush programs in an e Break up of technical resources organization concerned with local infrastructure Opportunity to combine sup- port for small electric systems with water, sewer, and solid waste R. W. BECK AND ASSOCIATES PAGE 36 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Organizational Options versus Goals—The discussion above has provided a framework for understanding the range of organizational options available for the AEA. Figure 6.4, Organizational Options vs. Goals, on the following page relates each option to the four goals this Plan has identified for the Authority. Although the three descriptors that have been used are high level, they do serve to differentiate the organizational options by goal. The darkened circle represents an organizational option that has a very strong effect on the successful accomplishment of the objectives under a particular goal. The open circle represents an option that will make a positive contribution toward the accom- plishment of a goal's objectives. Blank elements of the matrix represent organ- izational options that will have no positive effect on the accomplishment of objectives in a particular goal area, and may even be detrimental to the accom- plishment of those objectives. Conclusion—Of all the options that have been discussed, the option where the AEA joins a joint action agency has the greatest potential for accomplishing the objectives under each goal. Under Goal One: e Electric system planning will be enhanced by bringing the utilities directly into the process through their inclusion on the JAA board of directors. As the relationships between JAA members matures, there will be a trend toward more coopera- tion through regional and Statewide planning. e Financings of energy projects will be enhanced because of the direct commitment of the utilities in future debt justification and commitment processes. ° Quality assurance will be enhanced as the utilities come to realize that they are directly involved in the operation and maintenance decisions and cannot rely on the State to fix prob- lems retroactively, problems that could have been avoided through better attention to current operations. ¢ Coordination will be enhanced by bringing the utilities into the decision making process through their role as member of their JAA; the AEA as a member of the JAA will be viewed as a participating member. R. W. BECK AND ASSOCIATES PAGE 37 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Figure 6.4 _ Alaska Energy Authority 1 2/3] 4 Organizational Options 8 a P AEA | 8 ; TE Ele oals o®\|E/|S w 2 ZS lz 2 aE 8 9 « a 2/s/elsi2le|s sie /E |e lee |3 e/f 5/8/88 le s)°|ec/aie So rn < & z 1. Complete Dissolution Te | Dissolution 2. Transfer to AIDEA ololojo O!|O 3. Replace with JAA Olrolol|o @|o oO 4.No Change oO oO oO O| _ O Oo cae No Change 5. Larger Board oO Oo e\e| loo] 6. Join JAAas Member | | @|@/@|@ ele * 7. Transfer to DCRA O!|lO!|O Oo] ©/\0O 8. Reduced Size & Responsibilities 9. Separate Bush from | Urban/Rural ; @ Best effect ©) Positive Effect | BLANK: No Effect or Negative Effect Goal Two points toward a self-sustaining electric utility industry. The creation of the JAA will be a major step in the utilities working together to take respon- sibility for their future capital additions. The ability to make collective decisions, plan, and jointly finance projects will remove the burden of State financing of electric system additions, while not precluding State assistance to the JAA if funds are available for worthy projects in the future. The JAA provides an organizational framework to receive the endowment of the AEA Restructuring Plan. The charter of the JAA can specifically address the R. W. BECK AND ASSOCIATES PAGE 38 ALASKA ENERGY AUTHORITY STRATEGIC PLAN administration of the restructuring plan and accommodate the use of its revenues to support programs outlined in the plan without violating the State's prohibition on dedicated funds. Goal Three deals with establishment of local or regional utilities to perform the bush community support functions now being provided by the AEA. The objectives under this goal provide a blueprint to identify the requirements necessary for bringing these utilities up to a standard whereby they can be economically self-supporting and efficiencies can be introduced to reduce the cost of providing electric services in remote areas—since the JAA utilities would have an oversight role in PCE administration, there will be motivation to install efficiency enhancing products. Goal Four addresses affordable electricity for all Alaskans under conditions of reduced State funding. As mentioned previously, the JAA offers the best vehicle for implementing the AEA Financial Restructuring Plan. Since the utilities will be the policy leaders of the JAA, there will be strong motivation to evolve a system providing reliable service, independent of State largess. The formation of a JAA offers the best potential for meeting the future energy needs of the State of Alaska; it will, take work. There will be those that will want to perpetuate the status quo for as long as possible—because they may think that their self interests are best served by taking what they can get while they can get it, or because change always entails risk. However, when looking at what would be best for the State and also serve the utility industry, the JAA is the best solution. The original concept of joint action agencies was created over forty years ago because there was a need for an entity that had more financing capability than any one utility. During the oil revenue rich years, this was the role the AEA provided as an agent of the State of Alaska. The ability to continue to provide this service is disappearing rapidly. However, the need for financings and Statewide planning remains; hence a workable alternative must be created—an Alaskan JAA is the preferred organizational option under this plan. R. W. BECK AND ASSOCIATES PAGE 39 ALASKA ENERGY AUTHORITY STRATEGIC PLAN B. Encourage Regional Utilities for the Bush One of the most difficult issues facing the provisioning of services in bush Alaska is economy of scale. The perpetuation of direct State funded grant and subsidy programs do not provide long term solutions to the problem. An integral part of the new strategic direction should be to use the very subsidy programs that have not encouraged the small systems to be economical as inducements to improve the efficiency of operations in the bush. This plan endorses a strategy that would work toward providing bush electric system funding only through regional or local utilities that meet a prescribed standard of performance. These qualified utilities would be the ones with the actual capability to preserve their assets, once installed, that can maintain the local systems at the least possible cost, and that are motivated to reduce future costs by gaining increasing economies of scale. Such regional utilities would add communities to their service areas and be entirely responsible for the operation of the local system. In order to be eligible for a State grant, a community would have to operate a utility that meets the prescribed standards, or it could pick a qualified regional utility of its choice, and, if that utility is willing to serve this local community, the community will have a professionally run system serving it. If the local community cannot or will not meet the AEA requirement to be served by a qualified utility, the grant would not be released. The PCE program should be modified to recognize and reward efficiency so that a utility serving a bush community would have an incentive to incorporate efficiencies into its system. Grants for system betterments would then contribute to the eventual reduction in PCE costs and better position it for the ultimate phase-out of the PCE program as called for in the AEA Financial Restructuring Plan. Implicit in this approach is the replacement of the AEA circuit rider program, intended to preserve the AEA investment in the bush, with operations and maintenance provided by designated regional or local utilities that meet the AEA's standards for performance. R. W. BECK AND ASSOCIATES PAGE 40 ALASKA ENERGY AUTHORITY STRATEGIC PLAN This strategy to be complete must address how to serve the very small bush communities that cannot be reasonably served by a regional utility under any economic assumptions beyond subsidization. If the community must be provided with centralized electric service, the State could continue such subsidi- zation but provided through a qualified regional utility. Alternatively, in estab- lishing the mandate for an Alaskan JAA, it could be charged with providing for reasonably priced electricity for all Alaskans subsidized through the proposed AEA Financial Restructuring Plan. R. W. BECK AND ASSOCIATES PAGE 41 APPENDIX 1. THE ALASKA ENERGY AUTHORITY In order to put the magnitude and range of the energy-related activities performed by the State of Alaska in perspective, the following four sections have been prepared. These sections outline the active energy programs and services provided by the Alaska Energy Authority and other State Agencies. Section A. _—_ Responsibilities Matrix Section B. Outline of AEA Activities Section C. AEA Programs and Services SectionD. Other State Agency Energy Programs R. W. BECK AND ASSOCIATES PAGE 42 ALASKA ENERGY AUTHORITY STRATEGIC PLAN A. Responsibilities Matrix This section provides a summary of activities in matrix form. Where two agencies provide a similar service, the two are listed separately in an attempt to show any dissimilarities between the services. Additional data provided in the matrix but not included in the second section is the basis of the authority allowing the respective programs or services. Such forms may include specific statutes, agencies enabling legislation, specific legislation for a specific project, State regulations, or federal legislation. This information is useful in determining what specific legislation, if any, would be required in transferring one program or service from one agency to another. CATEGORY AGENCY Basis! YEAR COMMENTS ESTAB. FINANCING paxaxs Bonds AEA Ss | 1976 7 power projects bond issues; $727 million; inception to date with currently outstanding obligation of | $163.2 million | Bonds AIDEA ss 0 power project bonds PDRLF AEA Ss 1984 1 loan; $184.6 million 1 SS—Specific Statute EL—Enabling Legislation SL—Specific Legislation REG—State Regulation FED—Federal Regulation R. W. BECK AND ASSOCIATES PAGE 43 ALASKA ENERGY AUTHORITY STRATEGIC PLAN CATEGORY AGENCY Basis! YEAR ESTAB. COMMENTS Loans: RERLF AEA SS 1981 13 loans; $5.3 million; Issued inception to date PPF BFRLF | Other Grants: AEA AEA AIDEA Ss ss SL 1976 1989 Grants Grants 1 ss—Spec REG—State Regulation Electrical Service Extension Fund ific Statute AEA EL 1976 41 loans; $38.7 million; issued inception to date 52 - one-year loans $770,000 out- standing at end of FY 92 $50.6 million to Healy Coal Project Numerous energy grants totaling about $29 million administered by AEA since inception AEA Ss 1991 $2.85 million; grants have been issued since inception AIDEA SL EL—Enabling Legislation FED—Federal Regulation R. W. BECK AND ASSOCIATES 1990 $25 million State grant for Healy J SL—Specific Legislation PAGE 44 ALASKA ENERGY AUTHORITY STRATEGIC PLAN CATEGORY AGENCY Basis! YEAR COMMENTS ESTAB. Financial Assistance PCE and predecessor AEA ss 1980 $181 million programs appropriated FY 80 through FY 94 = Insurance AEA EL 1989 Self-insurance programs set up for A-F Intertie and Four-Dam Pool $7.6 million FY92 1 $S—Specific Statute REG—State Regulation vation Program | EL—Enabling Legislation FED—Federal Regulation HELP1 AHFC/ERH HELP2 AHFC/ERH Home Improvement AHFC/ERH | Rebate Program AHFC/ERH Weatherization AHFC/(2) Program Institutional Conser- AHFC SL—Specific Legislation R. W. BECK AND ASSOCIATES PAGE 45 ALASKA ENERGY AUTHORITY STRATEGIC PLAN CATEGORY AGENCY Basis! YEAR COMMENTS ESTAB. RURAL ENERGY PROGRAMS Rural Technical AEA EL 1988 $2.35 million Assistance appropriated since 1988 Meter Installation & AEA EL 1988 $650,000 Survey appropriated since 1988 Rural Data Acquisition AEA EL 1989 $300,000 appropriated since 1988 Bulk Fuel Assessments AEA EL 1990 $3 million appropriated | since 1990 Bulk Fuel Cooperative AEA EL 1991 $150,000 Grants appropriated | since 1991 Emergency Prevention/ | AEA EL 1989 $500,000 Response appropriated since 1988 Life, Health, Safety AEA EL 1991 $3.25 million Grants appropriated since 1991 Bulk Fuel System $1.5 million in Upgrades 1993 appro- | priated PCE Efficiency $5 million Improvements appropriated since 1989 Circuit Rider Program $2.2 million appropriated since inception 1 $S—Specific Statute REG—State Regulation EL—Enabling Legislation FED—Federal Regulation SL—Specific Legislation R. W. BECK AND ASSOCIATES PAGE 46 ALASKA ENERGY AUTHORITY STRATEGIC PLAN CATEGORY AGENCY Basis! YEAR COMMENTS ESTAB. RURAL ENERGY /CONSTRUCTION/CONSTRUCTION ASSISTANCE PROJECTS (FUNDS PROVIDED BY COMMUNITIES, HUD, ETC.) Generation, Transmission, Distribution Electric Utility AEA EL : 1986 AEA has pro- vided such activities on about 40 proj- ects totaling about $2 mil- lion since inception Sanitation VSW VSW has pro- vided such activities on numerous proj- ects since inception WASTE HEAT General AEA EL 1982 AEA has pro- vided such activities on 55 locations totaling about $7.1 million since inception VSW has pro- vided such activities on numerous projects since inception Sanitation VSW 1 $S—Specific Statute EL—Enabling Legislation SL—Specific Legislation REG—State Regulation FED—Federal Regulation R. W. BECK AND ASSOCIATES ‘PAGE 47 ALASKA ENERGY AUTHORITY STRATEGIC PLAN CATEGORY AGENCY Basis! YEAR COMMENTS ESTAB. EDUCATIONAL/R&D Library AEA EL 1976 Library AHFC Seminars / Workshops: Rural Utility Training | AEA EL 1992 $300,000 ae eer - Dept. of Com- munity and Regional Affairs Building Standards ACHP Bioenergy AEA EL 1980 Program Circuit Rider AEA EL 1988 $1 million | appropriated since 1988 Energy-Efficient AHFC Education Fund AUDITS Business Energy AHFC/ Assistance Utilities 1 SS—Specific Statute EL—Enabling Legislation SL—Specific Legislation REG—State Regulation FED—Federal Regulation R. W. BECK AND ASSOCIATES PAGE 48 ALASKA ENERGY AUTHORITY STRATEGIC PLAN B. Outline of AEA Activities This section provides a brief synopsis of each program or service of State agencies involved in energy matters, specific projects (if applicable and if data was available) accomplished under the program, and recent funding levels. In some instances, funding levels for the current fiscal year were not available. It should be noted that some projects of the AEA could fit into more than one program. Loan/Financing Bond Financing Bradley Lake (AEA Owner) $267.5 million variable rate bonds (interim financing) - 11/85 $105 million long-term debt - 9/89 (long-term financing) $60 million long-term debt - 8/90 (long-term financing) Slana Energy, Inc. (Backscatter Radar Project - Power Plant) $34 million (conduit financing) - 3/90 Galena Power Project $2.9 million (conduit financing) - 5/91 Larsen Bay Hydro (AEA Owner) . $855,000 bond financing - 5/91 Sitka Financing $56.89 million (conduit financing) - 5/92 FDP-PDRF loan - 9/84, Four-Dam Pool $184.6 million Loan terms/YR 2030 - Being repaid with revenue from power sales. Note: Prior to the State loan, interim financing of this project was provided through the issuance of $200 million Variable Rate Demand Notes. Also, AEA administers an irrevocable trust of about $20.9 million to defease $44.9 million of REA mortgage notes that AEA assumed in 1982. R. W. BECK AND ASSOCIATES PAGE 49 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Rural Electrification Revolving Loan Fund Interest rate = 2 percent Utility must make a minimum investment in the project equal to the cost of one transformer, one span of line, one pole, and one service drop for each initial customer. There must be at least three new customers served by the project to be eligible for a RERLF loan. Principal of loan repaid based on a formula which considers the rate at which new customers are added to the extension and may be deferred indefinitely. RERLF loans are made only if a repay- ment analysis shows that repayment of principal is likely within ten years. Because of the complexity of the rules and repayment criteria, this loan program was never fully taken advantage of and has been replaced by the Electrical Line Extension Service Fund. Number of Loans/Total Principal Outstanding at 6/30/92 - 13/$4.6 million Power Project Fund Term not to exceed 50 years. Interest rate not less than 5 percent and the lesser of 1.) 52-week average yield of 30-year municipal - bonds or 2.) a rate determined by AEA which allows the project to meet financial feasibility. Used for development of new power production upgrade, conservation, bulk fuel storage facilities, T&D, or potable water supply projects. Number of Loans/Total Principal Outstanding at 6/30/92 - 41/$24.9 million Bulk Fuel Revolving Loan Fund Allow communities and utilities to buy fuel in bulk and save on transportation costs. Established in 1980 but transferred to AEA by Executive Order from Division of Investments (DCED) on 7/1/89. Loan up to $50,000 with one-year period to communities with population of less than 2,000. Interest rate = 0 for first loan, 5 percent for second, and third and subsequent based on muni bond rates. R. W. BECK AND ASSOCIATES PAGE 50 ALASKA ENERGY AUTHORITY STRATEGIC PLAN 6/30/92 - 52 outstanding /$791,000 About 120 loans are administered annually. Fund balance at 12/92 $1.49 million. Operating Projects AEA Owned and Operated Projects - $917 million AEA Owner Anchorage-Fairbanks Intertie $124,250 Bradley Lake Hydroelectric Project $328,000 Solomon Gulch Hydroelectric Project $73,874 Swan Lake Hydroelectric Project $96,173 Lake Tyee Hydroelectric Project $128,602 Terror Lake Hydroelectric Project $199,439 Larsen Bay Hydroelectric Project $1,602 Bethel-Napakiak Intertie $195 Bethel-Oscarville Intertie $199 Craig /Klawock Transmission Line $864 Kobuk-Shungnak Transmission Line $1,278 Waste Heat Systems $3,535 Four-Dam Pool $477,600 Anchorage-Fairbanks Intertie $124,200 $1,559,811 Self Insurance AEA established self insurance programs for the Four-Dam Pool and the Anchorage-Fairbanks Intertie. In the event of claims, AEA has entered into two lines of credit. The line of credit for the Four-Dam Pool facilities is $10 million and is secured by a capital reserve fund set up by borrowing from the Power Development Revolving Loan Fund. The Anchorage-Fairbanks Intertie line of credit is $1 million. Alaska Bioenergy Program Active since 1980 - $706,000 Federal funds since inception (U.S. DOE); supported by 50 percent State matching funds With AEA since 7/1/85. It supports economic development by seeking to replace high-cost fossil fuels with lower cost biomass fuels such as wood residue, municipal solid waste and agricultural waste. R. W. BECK AND ASSOCIATES PAGE 51 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Rural Programs The Authority grants funds to rural communities for work on projects that meet funding objectives for a number of different energy programs. Construction activities are managed by community representatives with training, assistance, and oversight provided by Authority staff. Grant projects optimize the use of local labor and training in construction trades, as well as operation and maintenance of utility equipment. The goal of local community participation is to instill a sense of ownership in the projects through involvement in all phases of construction and management. This program is funded by direct legislative grants to the Authority for specific communities, and through the following "Umbrella" appropriations: Operation, Technical and Emergency Assistance (OTE Program) $6.4 million appropriated since inception, established FY 88. Funds are allocated by AEA among the following programs: Rural Technical Assistance The Rural Technical Assistance Program provides communities access to Authority staff expertise in mechanical, electrical, and civil engineering as well as economic and administrative matters relating to rural energy systems. Rural utilities, communities, and school districts can use the program to address electrical system safety and health hazards, utility operating costs, system efficiencies, and waste heat alternatives. Authority staff can also evaluate and recommend electrical system upgrades, power plant and bulk fuel storage relocation, and assist with equipment procurement upon request. Depending upon staff recommendations, technical assistance visits may lead to participation in other Authority programs such as Rural Power Systems Upgrades, Metering Installation, or Circuit Rider Maintenance. The Rural Technical Assistance Program is also used to fund the State-matching portion of the federal grant for the Alaska Bioenergy Program, which assists communities in using waste wood and municipal solid waste as energy resources. Provides electrical, mechanical, civil engineers, diesel mechanics, linemen, financial advisors and economists to assist in systems R. W. BECK AND ASSOCIATES PAGE 52 ALASKA ENERGY AUTHORITY STRATEGIC PLAN inspections, contract preparations, construction management and design. Funding provided from community, utility, school district, local housing authority, State grant or loan, or federal agency. Funds from Rural Electrification and Waste Heat can also be blended when necessary. Funding: FY 93 - $400,000 FY 92 - $400,000 YEO I= $400,000 FY 90 - $500,000 FY 89 - $500,000 FY 88 - $150,000 $2,350,000 Metering Installation and Survey Program For Power Cost Equalization (PCE) communities. Provides for installation of electrical system meters in rural utilities. Types of meters include energy meters, station service meters, and fuel meters. Also promotes better analysis and management of system efficiencies. Funding: FY 93 - $175,000 FY 92 - $175,000 FY 91 - $75,000 FY 90 - $75,000 FY 89 - $150,000 $650,000 Rural Data Acquisition Remote monitoring devices to collect information on system loads and operating conditions. Used to then assist in troubleshooting system efficiency problems. Funding: FY 93 - $75,000 FY 92 - $75,000 FY 91 - $75,000 FY 90 - $75,000 $300,000 Circuit Rider Maintenance This activity has been included in the OTE capital budget until now, but for FY 94, it is included in the operating budget. Provides technical assistance to assure proper maintenance of equipment and training of rural operators and utility accounting personnel. R. W. BECK AND ASSOCIATES PAGE 53 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Designed to reduce utility operating costs, prevent safety hazards, avoid expensive emergency repair situations. Produced videotape for training. Modeled after the Remote Maintenance Worker program administered by Village Safe Water (DEC). Funding: FY 93 - $600,000 FY 92 - $500,000 FY 91: $600,000 FY 90 - $500,000 $2,200,000 Rural Utility Training New in FY 92 although videos produced in FY 92 in the Circuit Rider program was technically under the Rural Utility Training. Funding: FY 93 - $250,000 FY 92 - $50,000 $300,000 Emergency Prevention and Response Technical advice for preventing imminent disasters and emergen- cies related to power failures. AEA works closely with Division of Emergency Services as a technical advisor during electrical system emergencies and declared disasters. Some parts and supplies kept and list of equipment available from others maintained. Funding: FY 93 - $100,000 FY 92 - $100,000 FY 91 - $50,000 FY 90 - $250,000 $500,000 Operations Support Operations of AEA facilities used in support of OTE program (i.e. warehouse, etc.). Funding: FY 93 - $100,000 PCE Efficiencies Improvement Program In order to qualify for funding, improvements must show a 10-year simple payback in PCE savings or a 30-year payback if project eliminates threat to life, health, or safety. R. W. BECK AND ASSOCIATES PAGE 54 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Projects are funded when it is determined that cost savings to PCE will result. Funding: . FY 91 - $2,500,000 appropriated FY 90 - $2,500,000 appropriated Life, Health, and Safety Grants The Life, Health, and Safety Program assists utilities and communities in correcting problems that pose an immediate threat to people, such as exposed or uninsulated wiring, unfenced substations, inadequate grounding, sagging distribution conductors, leaking fuel storage tanks, and code compliance inadequacies. Once upgraded, the rural utility is required to hire a qualified operator and to participate in the Authority's Circuit Rider Maintenance Program to ensure that the system is properly operated and maintained, thus protecting the State's investment in the system. More than 60 villages were identified in 1992 as potential candidates for the Life, Health, and Safety Program. About one-half of the villages were surveyed as part of the Rural Alaska Bulk Fuel Assessment Program. Funding: FY 93 - $1,500,000 FY 92 - $1,000,000 FY 91 - 750,000 $3,250,000 Rural Energy Construction Assistance $2 million Provided on projects for which the Authority receives funds from local housing authorities, school districts, or utilities requesting assistance. Sometimes the Authority also funds part of those projects. The Rural Construction Assistance Program is unique in that it requires no direct State funding. The program was initiated because communities, utilities, and housing authorities requested technical assistance on energy- related projects from the Authority. These entities may already have secured funding for an energy project, but not have the expertise to administer it. Under this program, the Authority has participated in technical and financial feasibility studies for developing North Slope Borough coal; extending transmission lines in Mentasta, Ekwok, Tuluksak, and Shageluk; installing waste heat systems in Buckland, Beaver, Akiak, Manokotak, and Clarks Point; and planning or arranging for tax-exempt financing for Slana, Galena, and Sitka, and taxable financing for Slana. R. W. BECK AND ASSOCIATES PAGE 55 ALASKA ENERGY AUTHORITY STRATEGIC PLAN AEA assisted in or performed the construction of over 40 projects under this program. Bulk Fuel Assessments and Emergency Repairs Began in 7/90 at request of legislature. Assessment made of fuel storage systems and minimal emergency repairs made. Funding: FY 93 - 1,000,000 FY 92 - 1,000,000 FY 91 - 1,000,000 $3,000,000 Bulk Fuel System Upgrades Funds design and upgrade of facilities in rural Alaska based on Bulk Fuel Assessments. Work accomplished through contract with administrative and project management oversight by AEA. In order to protect public safety and the environment, ensure continued delivery of vital petroleum products, and reduce future liability for tank farm owners and the State, the existing bulk fuel facilities in rural Alaska must be repaired and renovated to meet current code and regulatory requirements. Corrective action is not optional, it is mandatory. The operations and maintenance programs must also be instituted to reduce future replacement and environmental mitigation costs. Need has been assessed in excess of $100 million. Funding: FY 93- $1,500,000 Bulk Fuel Cooperative Grants Assist in developing bulk fuel purchasing cooperatives. Six grants have been awarded since inception. FY 92 - $75,000 FY 91 - $75,000 Waste Heat Recovery Program AEA has been active in waste heat since its inception. Services include identification of potential projects, design, and construction management. Early projects were built and simply turned over to the electric utility, and these projects had a number of things go wrong for a variety of reasons. The next generation seems to be working and maintained better, R. W. BECK AND ASSOCIATES PAGE 56 ALASKA ENERGY AUTHORITY STRATEGIC PLAN and agreements are put in place where the user of the heat pays the utility an amount that approximates a percentage of its savings in fuel bills. AEA has worked on 55 waste heat systems throughout the State. In some years, money is set aside in budget specifically for waste heat. In other years, money can be used from Rural Technical Assistance. Funding: FY 93 - $250,000 FY 89 - $200,000 FY 88 - $500,000 FY 85 - $1,131,000 FY 83 - $5,000,000 $7,081,000 Electrical Service Extension Fund The Electrical Service Extension Fund was established by the Alaska Legislature in 1991 to provide matching funds to electric utilities to help defray the high costs of extending new electrical service to residences and small businesses. The fund provides grants for up to 60 percent of the cost of site preparation and construction for qualifying projects. Matching funding of at least 40 percent of total eligible project costs must be contributed by the applicant. Projects to improve existing distribution facilities also are eligible under this program, but are given lower priority in the project selection process. As of October 1992, eight of the nine Electrical Service Line Extension Fund projects which received FY 92 funding had been completed. These projects are located at Klawock, Kake, Sheep Mountain, Fish Lake, Bruce Lake, South Shirley Lake, Old Ridge Trail, and Panguingue Creek. The Authority also awarded a number of contracts for Electrical Service Extension projects in FY 93. Contracts with a total value of $1,830,649 were awarded to Chugach Electric Association Inc., Copper Valley Electric Association Inc., Matanuska Electric Association Inc., Tlingit & Haida Regional Electrical Authority, Sand Point Electric Inc., Far North Utilities Inc., Alaska Power & Telephone Company, and Homer Electric Association Inc. Power Cost Equalization (PCE) From FY 1981 through FY 1993, a total of $180.8 million has been appropriated for PCE and its predecessors, Power Cost Assistance and Power Production Cost Assistance. R. W. BECK AND ASSOCIATES PAGE 57 ALASKA ENERGY AUTHORITY STRATEGIC PLAN The PCE program was established by the Alaska Legislature in 1984 as a statewide program aimed at reducing consumer cost of electricity in rural Alaska communities where diesel-fired generation meets more than 75 percent of a community's electrical requirement. During FY 92, 97 utilities serving 167 communities with a total population of about 66,000 were eligible to participate in the PCE program. AEA administers this program and disperses funds to electrical customers through local utilities. PCE subsidy rates for each utility are established by the APUC. Federal government provides additional money to DHSS for low income energy assistance. R. W. BECK AND ASSOCIATES PAGE 58 ALASKA ENERGY AUTHORITY STRATEGIC PLAN C. AEA Programs and Services The AEA is involved in many energy-related matters. The range of their activi- ties should be kept in mind when considering the appropriateness of organiza- tional alternatives. The following lists summarize these varied programs and services. Rural Programs Umbrella Programs: Operations, Technical, and Emergency Assistance Power Cost Equalization Utilities Efficiency Improvements Life, Health, and Safety Improvements and Code Compliance Bulk Fuel Assessment and Emergency Repairs Waste Heat Recovery Rural Energy Construction Assistance Bulk Fuel Cooperative Grants Alaska Bioenergy Program Specific Projects active at 12/31/92: Allison Lake Aniak Bulk Fuel Storage Engineering, Design and Site Preparation Atmautluak Metering Bulk Fuel Cooperative Grants Bulk Fuel Emergency Repair/Upgrades Bulk Fuel System Assessments and Emergency Repairs Denali Electrical Line Extension Electrical Service Extension Fund Energy Enhancements Hope Electrical Line Extension Iliamna/Newhalen/Nondalton Electric Cooperative Ivanof Bay Electrical Power Upgrade Karluk Fuel and Electric System Improvements King Cove Hydroelectric Project Kokhanok Electrical System Upgrade Koliganek Electrical System Upgrade Life, Health and Safety Improvements Lime Village Electrical System Study Nikolai Electrification System Replacement Nyac-Bethel Hydro Intertie Study Operation, Technical, and Emergency Assistance Port Alsworth Electrification Port Heiden Electrical System Upgrade/Improvements Power Cost Equalization Utilities Efficiency Improvements R. W. BECK AND ASSOCIATES PAGE 59 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Specific Projects active at 12/31/92: (cont.) Railbelt Intertie Feasibility Study Rural Community Feasibility Rural Electrification Rural Energy Construction Assistance Rural Power Systems Upgrades Southeast Intertie Feasibility St. Mary's Bulk Fuel Storage St. Paul Electrical Systems Repair Stream Gaging Tatitlek Electrification Tyee-Swan Intertie Feasibility Waste Heat Recovery Program Western Alaska Fuel Cooperative Facilities Operation and Maintenance Four-Dam Pool Anchorage-Fairbanks Intertie Bradley Lake Hydroelectric Project Larsen Bay Hydroelectric Project Bethel-Napaskiak Intertie Bethel-Oscarville Intertie Craig/Klawock Transmission Line Kobuk-Shungnak Transmission Line Waste Heat Systems Other Programs and Financing Power Cost Equalization Alaska Electric Power Statistics Program Bulk Fuel Revolving Loan Fund Power Development Revolving Loan Fund Loan Programs (Power Project Fund, Rural Electrification Revolving Loan Fund) Self-Insurance Third Party Financing of AEA-owned Projects Authority Financings of Projects Owned by Third Parties Electric Service Extension Fund R. W. BECK AND ASSOCIATES PAGE 60 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Potential New Projects Railbelt Interties Bulk Fuel System Upgrades Sutton-Glennallen Intertie Greens Creek Intertie Snettisham Acquisition Small-scale Coal-fired power plants Demand-side Management Programs Tazimina Hydroelectric Project Unalaska Geothermal Project Rural Interties Waste Heat Projects: Lemon Creek District Heat/Juneau Spring Creek District Heat/Seward R. W. BECK AND ASSOCIATES PAGE 61 ALASKA ENERGY AUTHORITY STRATEGIC PLAN D. Other State Agency Energy Programs DEPT. OF COMMUNITY AND REGIONAL AFFAIRS (DCRA) All energy programs previously managed by DCRA have been transferred to Dept. of Revenue - AHFC. DEPT. OF HEALTH AND SOCIAL SERVICES (DHSS) Low Income Home Energy Assistance Program (LIHEAP Subsidy program that is federally funded. Applicants are rated based on household size and group income for previous three months. Based on this data, part or all of the gas and electric bills are subsidized. Federal money is first dispersed to native groups in Alaska and the remaining amount is provided to DHSS. Alaska in turn provides some of their share to the native groups so that subsidies are equal on a per capita basis. Last fiscal year, DHSS provided DEPT. OF REVENUE - AHFC Alaska Energy Efficient Education Fund Grant program to agencies for education programs. Grants in past have ranged from $2,000 - $30,000. Business Energy Assistance Team Original program was directed at training people to perform energy audits of businesses. Now, grants are given to utilities to train either in- house personnel or outside contractors to perform the audits. Energy Resource Center Energy library open to public. Publications can be checked out similar to a regular library. Home Energy Rating Collaborative Process AHFC is working with other states on a national basis to establish home energy rating standards. Energy Rated Homes of Alaska Grants to individuals to perform energy audits. This program is in con- junction with the work performed by Energy Rated Homes described later. Home Energy Efficiency Program Programs administered by Energy Rated Homes described later. R. W. BECK AND ASSOCIATES PAGE 62 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Regional Home Energy Rating System and Energy Efficient Mortgage Demonstration Federally funded program where AHFC is working with the States of Washington, Oregon, Idaho, and Montana in developing energy rating systems. Institutional Conservation Program Assistance to schools and hospitals. Grants are made for studying conservation measures as well as funding for implementing those measures. Low Income Weatherization Assistance Program Grants to four different organizations who in turn disperse the funds to low income families based on the organizations respective criteria. Four organizations include Alaska Community Development Corporation, Municipality of Anchorage, Rural CAP; and Interior Weatherization. Each has its own program for dispersing the funds to low income. ALASKA CRAFTSMAN HOME PROGRAM Private organization initially funded with a $600,000 State grant and a subse- quent $300,000 grant. The organization holds seminars and distributes literature on building standards, techniques, etc. in Alaska and attempts to raise the level of awareness of energy efficiency throughout the general population. The program was supposed to be self-supporting by charging for seminars, etc. ENERGY RATED HOMES Home Energy Loan Program (HELP1 This program is for persons purchasing or building new homes. If the new home is above the minimum energy standards, the principal on the 7 loan is bought down on a sliding scale depending on how far above the minimum standards the energy rating is. Loan buy down is up to 15 percent of loan, but does have dollar ceilings as well. Existing Home Improvement ~ Same as HELP1 but this is for a home improvement loan. Interest Rate Reduction (HELP2) Provides an interest rate reduction on loans used for upgrading energy rating of existing home. Provides 7 percent off lenders interest rate but does not cover such items as labor, cost of installation, etc. Basically, it covers the cost of the product itself. This program is the only one that is not contingent on having an energy rating performed. R. W. BECK AND ASSOCIATES PAGE 63 ALASKA ENERGY AUTHORITY STRATEGIC PLAN Rebate Program Provides rebates on items purchased to increase energy efficiency of existing home. An initial energy rating is performed prior to the purchase, and a second rating is performed afterwards. The two ratings are compared, and a rebate is given depending on the step increase in rating. DEPT. OF COMMERCE AND ECONOMIC DEVELOPMENT All energy programs and loans within the department have been consolidated under AEA. DEPT. OF ENVIRONMENTAL CONSERVATION - Village Safe Water Division Village Safe Water administers grants, performs engineering, or has the engi- neering performed by a third party on waste heat systems, back-up generating systems, and other non-energy related systems. The waste heat and back-up generating systems must be related to sanitation facilities for it to qualify for a grant from VSW. ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY (AIDEA) AIDEA's role in specific energy projects is presently limited to the construction, finance, and ownership of the Healy Clean Coal Project and very preliminary investigations of the Unalaska Geothermal Project. The Healy Project was brought under AIDEA's jurisdiction by specific legislation. Other energy facilities may be funded but only if they are support of an indus- trial development project. For instance, the power facilities at the Red Dog Mine and a line extension for the Fort Knox Gold Mine were or will be financed for specific industrial development projects. R. W. BECK AND ASSOCIATES PAGE 64 APPENDIX 2. INTERVIEWEES The following list consolidates the individuals interviewed during the course of the development of this strategic plan for the Alaska Energy Authority: Interviewee Al Adams John Ayers Edgar Blatchford Kay Brown Sam Cotten Bill Corbus Larry Crawford Bob Cross Dave Denig-Chakroff Gene Dusek Dave Eberle Dick Emerman Steve Frank Paul Fuhs Ron Garzini Scott Goldsmith Gordon Harrison Jim Hendershot Herv Hensley Dave Highers Bob Hufman Clayton Hurless Dave Hutchens Mike Kelly Susan Knowles Dennis Lewis O ae State Senator, Kotzebue President, Alascom Commissioner of DCRA, AEA Board of Directors State Representative, Anchorage State Representative, Eagle River Alaska Electric Light & Power Municipal Manager, Anchorage, Past AEA Executive Director Alaska Power Administration Alaska Energy Authority Past Budget Director, AEA Alaska Energy Authority Alaska Energy Authority State Senator, Fairbanks Commissioner, DCED, AEA Board of Directors Executive Director, AEA Institute for Social & Economic Research Director, Legislative Budget and Audit Board of Directors of Chugach Electric Association Alaska Energy Authority GM, Chugach Electric Association AEA Board of Directors, Retired General Manager of Golden Valley Electric Association GM, Copper Valley Electric Association Executive Director, ARECA GM, Golden Valley Electric Association Commissioner, APUC GM, Petersburg Electric Utility R. W. BECK AND ASSOCIATES PAGE 65 Interviewee Bob Lohr Gloria Manni Bob Martin Ervin Martin Allan Mitchell Joyce Murphy Dave Nease Glenn Olds Brent Petrie Clarissa Quinlan Ken Ritchey Diane Rabb Ron Saxton Don Schroer Jim Seagraves John Shaeffer John Siebert Stan Sieczkowski Tom Stahr Shelby Stastney Tom Stevenson Gary Stromberg Frank Turpin Charlie Walls Eric Wohlforth Eric Yould ALASKA ENERGY AUTHORITY STRATEGIC PLAN Organizati Executive Director, APUC Alaska Energy Authority GM, Tlingit-Haida Regional Electrical Authority, AEA Board of Directors Alaska Division of Emergency Services Energy Consultant AEA Board of Directors, Former Chairperson, Chugach Electric Association GM, Kodiak Electric Association Commissioner of DNR, AEA Board of Directors Alaska Energy Authority Energy Consultant GM, Matanuska Electric Association Executive Director, RAPA Counsel, Four-Dam Pool and Bradley Lake Power Purchasers Chairman, APUC Nuveen & Company NANA Alaska Science & Technology Foundation Alaska Energy Authority GM, Anchorage Municipal Light & Power Director, OMB GM, Ketchikan Public Utilities Parisena & Stromberg, CPA's Commissioner, DOTPF GM, Alaska Village Electric Cooperative Bond Counsel/AEA Manager, Alaska Operations /Ebasco, Past Executive Director, AEA R. W. BECK AND ASSOCIATES PAGE 66 ALASKA ENERGY AUTHORITY STRATEGIC PLAN APPENDIX 3. PROPOSED FINANCIAL RESTRUCTURING PLAN R. W. BECK AND ASSOCIATES PAGE 67 | State of Alaska NN | Walter J. Hickel. Governor Alaska Energy Authority A Public Corporation FINANCIAL RESTRUCTURING OF THE ALASKA ENERGY AUTHORITY On October 12, 1992 the Board of Directors of the Alaska Energy Authority voted unanimously in favor of financially restructuring the Authority. That vote of support came after months of work by utilities around the state and the Authority to develop a plan to position Alaska to meet future energy needs during a time of declining state revenue. The following day, Governor Walter J. Hickel gave the effort his strong support and said he would propose legislation in January to implement the financial restructuring. The legislative package is designed to serve two major goals: promote economic diversification by expanding the availability of reliable and affordable power, and provide continuing support for rural village economies by extending the Power Cost Equalization (PCE) program. The financial restructuring would establish the Alaska Energy Authority Revolving Fund. The Fund and its earnings would provide the financial structure needed to construct four proposed intertie projects: one between the Kenai Peninsula and Anchorage, a second between Healy and Fairbanks, a third between the Copper River Valley and the Railbelt, and a fourth in Southeast Alaska to tap the underutilized power of the Tyee hydroelectric project. In addition, it would provide an annuity of $17 million annually for 20 years to assure reasonable power costs. in rural areas through Power Cost Equalization (PCE) or more efficient energy projects. It would also support a continuing budget of about $3.5 million per year for rural technical assistance, small capital projects and conservation efforts. The new Fund's beginning balance would be $154.8 million. It would be composed of $2.8 million currently in the Railbelt Energy Fund, $100 million in the Railbelt Intertie Reserve Fund, $21 million in interest on the Railbelt Intertie Reserve Fund, a Bradley Lake construction surplus of $11 million and an additional State contribution of $20 million. Annual revenues, such as repayment of the State loan for construction of the Four Dam Pool, would be deposited in the Fund as received. With the exception of an annual General Fund appropriation (which would decline to zero over a seven-year period) to help support the PCE program, and any additional appropriations the Legislature may choose to make for specific purposes, the Authority would become self-supporting. The restructuring would have a beneficial impact on the Authority's overall operations because it would make the structural changes necessary to establish accounts and prepare financial forecasts on a multi-year basis based on its kilowatt hour sales and investment income in keeping with normal practice in the utility industry. The legislation would propose specific language to authorize the establishment of reserve accounts for renewals and replacements, self-insurance, and capitalization to support and preserve operating projects. This would allow for long-range commitment of funds which, in turn, would allow long- range planning to occur. Currently, the Authority is limited in its ability to engage in long- PO. Box 190869 701 East Tudor Road Anchorage, Alaska 99519-0869 (907) 561-7877 Fax: (907) 561-8584 92Q4\IT4012(1) January 29, 1993 Page 1 of 4 range planning due to the uncertainty of an annual budgeting process that requires an infusion of General Fund dollars. According to utility estimates, the existing Anchorage-Fairbanks Intertie presently saves Railbelt consumers roughly $7 million per year by allowing less expensive power from Southcentral Alaska to supply a significant portion of Fairbanks power requirements. However, the capacity of the Railbelt transmission system is inadequate for present day demands, and the existing single line connections do not satisfy prevailing industry reliability standards. The single line between Anchorage and the Kenai Peninsula was built 30 years ago, but regional power demand is now 10 times higher than it was when the line was new. The single line from Healy to Fairbanks was built 25 years ago to carry 25 megawatts from a Healy power plant. Now that line carries 95 megawatts, including 70 megawatts from Anchorage. Both of the lines were built for a smaller system scale in an earlier era, and are now pushed to their operational limits. Construction of the two interties would allow full use of the Bradley Lake hydroelectric project's capacity throughout the Railbelt and would accommodate additional power should a third turbine be added to the project. The estimated construction cost of the Healy-Fairbanks and the Anchorage-Kenai Peninsula interties is $180 million. The AEA Fund would provide one-half of the cost with a zero interest loan. The remaining half of the construction cost would be financed with revenue bonds. The Copper Valley region and Southeast Alaska also would benefit from an expanded transmission network. Copper Valley electricity consumers are burdened with retail power rates that, with the exception of rural Alaska, are among the highest in the United States -- close to 20 cents per kilowatt hour. Power demand in the region is growing beyond the energy capability of the Solomon Gulch hydroelectric project that presently serves the area. With the additional power requirements from the new Petro Star oil refinery in Valdez, roughly half of Copper Valley's electricity will be supplied with diesel generation. An intertie between the Copper Valley system and the Railbelt would provide lower cost power and eliminate the need for diesel fuel to generate electricity. The preliminary cost estimate for the Copper Valley intertie is about $60 million, with $40 million coming from the AEA Fund in the form of a zero interest loan. The remaining monies would come from revenue bonds. A full feasibility study on the project is planned for 1993. 92Q4\IT4012(2) January 29, 1993 Page 2 of 4 In Southeast, the Tyee hydroelectric project provides power to Wrangell and Petersburg. However, due to low demand only one-third of the project's generating capability is now being used. Ketchikan, south of the Tyee project, receives much of its electricity from the Swan Lake hydroelectric project. However, local demand is now outstripping Swan Lake's generating capability. The city will soon have to generate additional electricity using diesel fuel. Ketchikan is an obvious candidate for an intertie with the Tyee hydroelectric project. Similarly, Juneau receives most of its electricity from the Snettisham hydroelectric project. Economic growth coupled with potential power sales to area mining developments could quickly lead to renewed fossil fuel-based power generation in the near future. As a result, Juneau is also a candidate for an intertie with the Tyee Lake hydroelectric project. The cost estimate for a Southeast intertie segment to market Tyee Lake surplus power is also in the range of $60 million, $40 million of which could be financed with a zero interest AEA loan and the balance financed with revenue bonds. The Energy Authority has administered what is now known as the Power Cost Equalization (PCE) program since its creation by the Alaska Legislature in 1981. Its purpose is to reduce the consumer cost of electricity in rural Alaska. In fiscal year 1992, about $15.2 million was spent on PCE. In its 12-year history, the PCE program has disbursed nearly $160 million to rural Alaska consumers in the form of rate relief. Although the bulk of power provided by utilities to commercial and industrial customers is not eligible for PCE, eliminating the program would double or even triple residential electric bills in many areas in tural Alaska. The Alaska Village Electric Cooperative (AVEC), one of 97 utilities receiving PCE, is a good example of the program's impact. AVEC serves a population of 17,400 people in 49 tural villages. Only about one-third of the kilowatt hours sold by AVEC are eligible for PCE. The average AVEC residential rate without PCE is 41.7 cents per kilowatt hour. However, the utility's customers receive 21.8 cents per eligible kilowatt hour from PCE, resulting in an average residential rate of 19.9 cents for the first 750 kilowatt hours used per month. This is still roughly twice the average cost of power in Anchorage, Fairbanks and Juneau, as well as Petersburg, Wrangell, Ketchikan and Sitka. The AEA Revolving Fund balance would be drawn down over a period of 20 years. During that time, the PCE Program would continue to be funded at roughly $17 million per year, regardless of the phase-out of State General Fund support. As annual PCE General Fund appropriations by the legislature were being decreased, contributions from the Revolving Fund would be increased to make up the difference. This would provide a transition period for rural utilities to adopt cost-savings measures such as utility consolidation or use of more efficient technologies, and for communities to adapt to higher real energy costs in the long run. 92Q4\IT4012(3) January 29, 1993 Page 3 of 4 Constructing the intertie projects will create a much stronger transmission system with greater capacity and far greater reliability, and eliminate the need to add additional diesel-fired generation capacity in many areas. All of these transmission projects will contribute to lower costs, greater reliability and greater system flexibility over the long term, all of which is critical to economic development and diversification. Further, the positive economic impact created by $300 million in construction projects over the next several years will be significant. Funding the Power Cost Equalization Program with an annuity not only benefits rural power consumers, but also will cut State General Fund spending by $17 million per year. Financially restructuring the Alaska Energy Authority will not reduce legislative oversight. The Authority will remain a state agency that must be responsive to the public's elected representatives. In conclusion, almost $135 million is available in reserve funds for the intended purpose of constructing energy projects. The premise of this proposal is that these revenues should be used for energy projects rather than lost to annual operating budgets. The proposal is further based on a deep concern that overnight reductions in the PCE Program would be catastrophic for rural Alaska. Financially restructuring the Alaska Energy Authority and creating the Revolving Fund can go a long way in meeting energy demand, promoting economic diversification and helping rural Alaska cope with today's high energy costs. We believe that providing reliable and affordable power is one of the best investments we can make with our non-renewable wealth. 92Q4\IT4012(4) January 29, 1993 Page 4 of 4 ALASKA ENERGY AUTHORITY page 1 of 2 (All Dollars in Thousands) 29-Jan-93 6/30/93 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 AEA Revolving Fund Balance $154,800 $172,401 $180,002 $180,920 $122,445 $61,600 $62,444 $61,520 $58,298 $55,383 $52,725 Revenue Revolving Fund Investment Income 11,610 12,930 13,674 13,660 9,163 4,620 4,683 4.614 4,372 4,154 Collections on Existing Loans 2.413 2.413 2271 2.244 2,234 2,181 2,130 1,956 1,937 1,931 Intertie State Loan Repayments Railbelt Interties 0 0 0 0 0 360 720 1,080 1,440 1,800 Southeast Intertie ° 0 0 0 0 0 160 320 480 640 Copper Valley Intertie o 0 o 0 0 0 160 320 480 640 Debt Service from 4-Dam Pool 10,306 10,667 10,900 11,165 11,405 11,584 11,766 11,932 12,064 12,121 Appropriation - PCE 17,000 14,571 12,143 9,714 7,206 4,057 2,429 0 0 0 Appropriation - PCE Admin. 102 190 190 207 217 227 237 o o 0 Total 4 4, 30,006 36, 90,325 23,629 22,205 20,222 20,773 21,286 Expenditure Railbelt Intertie Construction 1,000 9,000 14,400 65,600 0 0 0 0 0 0 Southeast Intertie Construction 600 600 1,200 3,600 34,200 0 0 0 0 0 Copper Valley intertie Construction 600 600 1,200 3,600 34,200 0 0 0 0 0 Conservation 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 Other Capital Projects/ Programs 1,000 1,046 1,002 1,141 1,193 1,246 1,302 1,361 1,422 1,486 AEA Administration 1,600 1,668 1,638 1,712 1,789 1,069 1,963 2,041 2,133 2,229 PCE Outlay $17,000 $17,000 = $17,000 $17,000 - $17,000 $17,000 $17,000 $17,000 $17,000 $17,000 Rural Technical Assistance 1,500 1,568 1,638 1712 1,789 1,069 1,953 2,041 2,133 2,229 Total 24 80 30,168 96,365 91,170 905 23 23,443 23,688 23,944 Surplus (Shortage) 17, 8 4 044 221 915) 659) $2,800 |Annua! Inflation Rate % Rhaiibelt intertie Reserve Fund 100,000 }Return on AEA Fund 7.6 % of fund balance Interest on Abit intertie Reserve 21,000 [PCE State Appropriation 7 year ramp Bradley State Fund Surplus 11,000 }interest Rate: State IntertieLoans 0.0 % Additional State Contribution 20,000 |Term: State Intertie Loans 50 years 154,800 |Raiibelt intertie Est. Total Cost $180,000 Railbelt Intertie State Loan $90,000 SE Intertie Est. Total Cost $60,000 SE Intertie State Loan $40,000 Copper Valley Est. Total Cost Projections exclude restricted revenues and associated expenditures. Vi (Example: revenues dedicated to project operations and maintenance.) Case 9d AEA Revolving Fund Balance Revenue Revolving Fund Investment income Collections on Existing Loans Intertie State Loan Repayments Railbelt Interties Southeast Intertie Copper Valley Intertie Debt Service from 4-Dam Pool Appropriation - PCE Appropriation - PCE Admin. Total Expenditure Raiibelt intertie Construction Southeast Intertie Construction Copper Valley Intertie Construction Conservation Other Capital Projects/ Programs AEA Administration PCE Outlay Rural Technical Assistance Total ALASKA ENERGY AUTHORITY page 2 of 2 (All Dollars in Thousands) 29-Jan-93 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $50,880 $48,442 $45,306 $41,795 $37,650 $32,920 $27,544 $21,457 $14,591 $6,871 Total 3,954 3,816 3,633 3,405 3,135 2,824 2,469 2,066 1,609 1,094 $111,315 1,631 1,600 1,425 1,347 1,333 1,333 1,333 1,333 1,333 1,333 35,920 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 23,400 e00 e00 e00 @00 @00 800 800 @00 00 800 9,600 @00 e00 e00 e00 e00 00 900 800 800 800 9,600 12,182 12,208 12,280 12,996 12,306 12,454 12,512 12,568 12,625 12,684 238,263 ° 0 0 0 0 0 0 0 0 0 68,000 0 o 0 0 0 o o 0 0 0 1,458 21 21 20,738 20,408 20,011 19,714 19,967 18,967 18,511 497,556 0 0 0 0 0 0 0 0 0 0 90,000 0 0 0 0 0 0 0 0 0 0 40,000 0 0 0 0 0 0 0 0 0 0 40,000 0 0 0 0 0 0 0 0 0 0 10,000 1,563 1,623 1,006 1,772 1,062 1,996 2,022 2,113 2,208 2,308 31,371 2,329 2.494 2,544 2,668 2778 2,903 3,034 3,170 3,313 3,462 47,057 = ce $17,000 $17,000 ee $1 od $1 ee $17,000 $17,000 ee 340,000 3,170 3,313 47,057 aoe a 23,784 24,000 oo rea a 25,454 25,834 26,231 645,486 Surplus (Shortage) _ ($1,845) ($2,490) _ ($3,046) ___ ($3,001) ($4,145) ($4,730) ___($5,376)___ ($6,087) (36,967) ($7,720) __ (147,929) Case 9d Legislative Handling of the Proposed AEA Restructuring The effort to restructure the Alaska Energy Authority was embodied in two pieces of legislation -- Senate Bill 124 and Senate Bill 125 -- which were introduced on Feb. 19, 1993. SB 124 was the primary enabling legislation for the restructuring. It also authorized the construction of interties and made changes in the Power Cost Equalization Program. The purpose of SB 125 was to consolidate the various funding sources, including the Railbelt intertie reserve fund, the Railbelt energy fund and unexpended funds from the Bradley Lake hydroelectric project, into the Energy Authority Revolving Fund. It should be noted that SB 124 was also used to make "housekeeping" changes in the overall statute. These changes, although of no consequence to the restructuring intent, resulted in a bill that was 31 pages long and gave the impression that the proposed legislation was a complex effort when, in reality, it was not. The legislation won strong support in the Senate, where it was passed with 16 of 20 votes. However, when the legislation was transferred to the House of Representatives during the closing days of the session, the House leadership objected to the bill based on motivations not associated with the intent of the legislation. The Senate leadership requested that the legislation be returned. Language requested by the Speaker of the House was added and the measure was sent back to the House where it was passed. The bills were signed by Governor Walter J. Hickel on May 13, 1993 as Chapters 18 and 19 of the 1993 Session Laws of Alaska. The subsequent legislation provided partial grant funding the Anchorage to Kenai and the Healy to Fairbanks interties which were included in the original bill. The new legislation also authorized a Sutton to Glennallen intertie as well as a Southeast intertie (Tyee to Swan Lake) through loans. A bill appropriated $66 million to fund the Power Cost Equalization Program, an amount expected to be sufficient to fund the PCE program at current levels for from four to five years. The legislation also dismembered the Alaska Energy Authority and transferred its indebtedness and owned facilities (about $1 billion worth) to the Alaska Industrial Development and Export Authority. The Energy Authority's rural programs and technology development functions were transferred to the Department of Community and Regional Affairs. As this is being written, the dismemberment process is in progress. On August 11, the Energy Authority Board of Directors was eliminated and replaced by the Board of Directors of AIDEA. Transferred to AIDEA were the Energy Authority's operating assets including the Four Dam Pool (the Solomon Gulch, Swan Lake, Terror Lake and Tyee hydroelectric projects), the Bradley Lake Hydroelectric Project and the Anchorage to Fairbanks Intertie, among others. As long as state investment and liability are protected, additional management of the operating assets is proposed to be turned over to the electric utility companies that either use the facilities (the Anchorage to Fairbanks Intertie) or purchase power from them (the hydroelectric projects). As a division within AIDEA, the corporate structure of the Energy Authority was retained but the ability to construct, own and acquire energy projects was eliminated. The Energy Authority's rural programs were transferred to a newly-created Division of Energy within the Department of Community and Regional Affairs. Division programs include Operational, Technical and Emergency Assistance; Electrical System Life, Health and Safety Improvements; Rural Utility Regionalization, Consolidation and Business Management Training; Rural Power Systems Upgrades; Emergency Bulk Fuel Repairs and Prevention; Statewide Electric and Power Project Development; Bulk Fuel System Upgrades; Alternative and Applied Energy Technology Development; and Energy Conservation Management Program for State-Funded Facilities. According to the legislation, the transfer of operating assets to AIDEA and rural programs to the Division of Energy must be completed by December 31, 1993. LAWS OF ALASKA 1993 Chapter No. 18 AN ACT Transferring certain projects of and amending and transferring programs of the Alaska Energy Authority to the Department of Community and Regional Affairs; relating to the Alaska Energy Authority; permitting the Alaska Industrial Development and Export Authority to issue revenue bonds for certain plants or facilities for energy resources; permitting utilities to form joint action agencies; authorizing the Alaska Industrial Development and Export Authority to issue revenue bonds for power transmission interties; relating to rates for a public utility that sends or receives power over certain power transmission interties; relating to the power cost equalization and capital improvement fund; amending the purpose of the Railbelt energy fund. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: THE ACT FOLLOWS ON PAGE 1 Approved by the Governor: May 13, 1993 Actual Effective Date: August 11, 1993 10 ll Chapter 18 AN ACT Transferring certain projects of and amending and transferring programs of the Alaska Energy Authority to the Department of Community and Regional Affairs; relating to the Alaska Energy Authority; permitting the Alaska Industrial Development and Export Authority to issue revenue bonds for certain plants or facilities for energy resources; permitting utilities to form joint action agencies; authorizing the Alaska Industrial Development and Export Authority to issue revenue bonds for power transmission interties; relating to rates for a public utility that sends or receives power over certain power transmission interties; relating to the power cost equalization and capital improvement fund; amending the purpose of the Railbelt energy fund. * Section 1. FINDINGS AND INTENT. (a) The legislature finds that adequate, reliable, -1- HCS CSSB 106FLN) eo ort A wn & YBN = PBSCReIURABEEOR ES BXREREBKB 29 31 Chapter 18 electric service at affordable rates is a necessary ingredient of a modem society and a | prosperous developing economy. The legislature further finds that at the current stage of social and economic development in the state, direct participation by the state is necessary to assist in the development of a regional electric transmission infrastructure and to assist in holding rates in high cost service areas to affordable levels. (b) The legislature recognizes the high cost of electric power in rural Alaska and intends that funding for power cost equalization from the general fund and from the power cost equalization and rural electric capitalization fund remain at a minimum of $17,000,000 annually through the year 2013. The legislature further intends that this long-term commitment to the power cost equalization program will permit and encourage the electric utility industry and its lenders to develop the plans, make the investments, and take other actions that are necessary or prudent to meet the utility needs of residents in rural Alaska. * Sec. 2. AS 37.05.520 is amended to read: Sec. 37.05.520. RAILBELT ENERGY FUND. There is established in the general fund the Railbelt energy fund. The fund consists of money appropriated to it by the legislature. The Department of Revenue shall manage the fund. Interest received on money in the fund shall be accounted for separately and may be to assist in meeting Railbelr nd facilities * Sec. 3. AS 42.05.141(b) is amended to read: (b) The commission shall perform the duties assigned to it under AS 42.45.10 - 42.45.1990 [AS 44.83.162]. * Sec. 4. AS 42.05.431 is amended by adding a new subsection to read: (h) When setting or reviewing rates for a public utility that sends or receives power over the power transmission interties between Fairbanks and Healy or between Anchorage and the Kenai Peninsula, the commission shall consider those costs that have not been directly assigned to other individual generating utilities by the utility ( responsible for the construction of the intertie to have been incurred for the system existing on the effective date of this subsection. HCS CSSB 106(FIN) -2- wo en AwnA & |S Pe = ee ee ee ee ee §~SCenlWIanRBROR ES REBSRB SSSR & Chapter 18 * Sec. 5. AS 42 is amended by adding a new chapter to read: CHAPTER 45. RURAL AND STATEWIDE ENERGY PROGRAMS. ARTICLE 1. POWER ASSISTANCE PROGRAMS. Sec. 42.45.010. POWER PROJECT FUND. (a) The power project fund is established as a separate fund. The fund shall be distinct from any other money or funds of the department and includes only money appropriated by the legislature and money deposited under (g) of this section. (b) Subject to AS 42.45.060, the department may make loans from the power project fund (1) to electric utilities, regional electric authorities, municipalities, Tegional and village corporations, village councils, independent power producers, and nonprofit marketing cooperatives to pay the costs of (A) reconnaissance studies, feasibility studies, license and permit applications, preconstruction engineering, and design of power projects; (B) constructing, equipping, modifying, improving, and expanding small-scale power production facilities that are designed to produce less than 10 megawatts of power, conservation facilities, bulk fuel storage facilities, and transmission and distribution facilities, including energy production, transmission and distribution, and waste energy conservation facilities that depend on fossil fuel, wind power, tidal, geothermal, biomass, hydroelectric, solar, or other nonnuclear energy sources; and (C) reconnaissance studies, preconstruction engineering, design, construction, equipping, modification, and expansion of potable water supply including surface storage and groundwater sources and transmission of water from surface storage to existing distribution systems; (2) to a borrower for a power project if (A) the loan is entered into under a leveraged lease financing arrangement, (B) the party that will be responsible for the power project is an electric utility, regional electric authority, municipality, regional or village corporation, village council, independent power producer, or nonprofit -3- HCS CSSB 106(FIN) eo ern A uA & YS NY = — ems 2aBewsRBanewes 18 SRVREREGB = 8 Chapter 18 marketing cooperative; and (C) the borrower seeking the loan demonstrates to the department that the financing arrangement for the power project will reduce project financing costs below costs of comparable public power projects. (c) Before making a loan from the power project fund, the department shall, by regulation, specify (1) standards for the eligibility of borrowers and the types of projects to be financed with loans; (2) standards regarding the technical and economic viability and revenue self-sufficiency of eligible projects; (3) collateral or other security required for loans; (4) the terms and conditions of loans; (5) criteria to establish financial feasibility and to measure the amount of state assistance necessary for particular projects to meet the financial feasibility criteria; and (6) other relevant criteria, standards, or procedures. (d) A loan made by the department shall be made according to the standards, criteria, and procedures established by regulation under this section. (e) Repayment of the loans shall be secured in any manner that the department determines is feasible to assure prompt repayment under a loan agreement entered into with the borrower. The department may make an unsecured loan from the power project fund to a borrower regulated by the Alaska Public Utilities Commission under AS 42.05 if the borrower has a substantial history of repaying long-term loans and the capacity to repay the loan. Under a loan agreement, repayment may be deferred for 10 years or until the project for which the loan is made has achieved earnings from its operations sufficient to pay the loan, whichever is earlier. (f) Power projects are subject to the following limitations on interest and specific restrictions: (1) power projects for which loans are outstanding from the former { water resources revolving loan fund (former AS 45.86) on July 13, 1978, may receive additional financing from the power project fund; if granted, HCS CSSB 106(FIN) -+ Co rmrnt Aun & YN = _ _— -— CSeIABKBEGDRES SSRURERREOKRES 31 Chapter 18 (A) the term of the additional financing may not exceed 50 years; (B) the interest of the additional financing must be at a rate of not less than three or more than five percent a year on the unpaid balance; (C) the grant of the additional financing must be conditioned on the repayment of loan principal and interest to begin on the earlier of (i) the date of the start of commercial operation of the project; or (ii) 10 years from the date the loan is granted; (2) a loan for a power project (A) may not be granted for a term that exceeds 50 years; and (B) shall be granted at an interest rate that is not less than zero percent and that is the lesser of (i) a rate equal to the percentage that is the average weekly yield of municipal bonds for the 12 months preceding the date of the loan, as determined by the department from municipal bond yield Tates reported in the 30-year revenue index of the Weekly Bond Buyer; or (ii) a rate determined by the department that allows the project to meet criteria of financial feasibility established under (c) of (g) Loan repayments and interest earned by loans from the power project fund shall be deposited in the power project fund unless an appropriation to fund the loan directs otherwise. (h) The legislature may forgive the repayment of a loan made from the power project fund for a reconnaissance study or a feasibility study when the department finds that the power project for which the loan was made is not feasible. (i) Money in the power project fund may be used by the legislature to make appropriations for costs of administering the fund. Sec. 42.45.020. RURAL ELECTRIFICATION REVOLVING LOAN FUND. (a) The rural electrification revolving loan fund is established in the department. The a HCS CSSB 106(FIN) eo ont anaunaeae vein = e2aneseoezers SSSReNVRERREBOREBS Chapter 18 fund consists of (1) appropriations made to the fund; and (2) repayments of principal and interest on loans made under this section. (b) Subject to AS 42.45.060, the department may make loans from the rural electrification revolving loan fund to electric utilities certified by the Alaska Public Utilities Commission. A loan from the fund may be made only for the purpose of extending new electric service into an area of the state that an electric utility may serve under a certificate of public convenience and necessity issued by the Alaska Public Utilities Commission. A loan may be made from the fund to an electric utility if the utility invests the money necessary to provide one pole, one span of line, one transformer, and one service drop for each consumer for whom immediate service would be provided by the extension of electric service. However, a loan may not be made from the fund unless (1) the loan is recommended by a loan advisory committee appointed under AS 42.45.030; and (2) the extension of electric service would provide immediate service to at least three consumers. (c) A loan from the rural electrification revolving loan fund shall bear an annual rate of interest of two percent of the unpaid balance of the loan. (d) When the department makes a loan under this section, the electric utility Treceiving the loan shall, (1) in addition to the rates that it is authorized to charge, charge the consumers served by the electric service extended with the loan proceeds an amount sufficient to pay the interest costs of the loan; (2) pay to the department annually an amount equal to (A) interest of two percent on the unpaid balance of the loan; and (B) payments on the unpaid balance of the principal of the loan for each new consumer served by the electric service extended with the loan proceeds; payments on the unpaid balance of the principal of the loan shall be HCS CSSB 106(FIN) -6- eo erNI ANA & BN = Nn bY FSF SF SOO K=SSCRIAADBRBORES BYREREBRB 29 31 Chapter 18 made at a rate equal to the difference between the actual cost of making the service connection to the consumers and the minimum investment per consumer required of the utility before a loan is made under (b) of this section. (e) The department shall (1) adopt regulations necessary to carry out the provisions of this section; (2) administer the rural electrification revolving loan fund; and (3) submit to the legislature within the first 10 days of each regular legislative session a report of actions taken by the department under this section and an accounting of the rural electrification revolving loan fund. (f) Money in the rural electrification revolving loan fund may be used by the legislature to make appropriations for costs of administering the fund. (g) On June 30 of each fiscal year the unexpended and unobligated cash balance of the fund that is attributable to loans owned by the fund lapses into the general fund. (h) In this section, (1) “consumer” means a person or a governmental agency, if the person or governmental agency requests and offers to pay for electrical service to a facility or part of a facility; the department shall consider a person who, or a governmental agency that, offers to pay for electrical service to several facilities to be a separate consumer for each facility, if each facility is physically separate from another facility, other than through electric service lines, and if the person or governmental agency Tequests and offers to pay for electrical service to each facility; (2) "facility" means a structure capable of receiving and using electrical energy; and (3) "governmental agency” includes, with respect to the state or federal government or a municipal government, a legislative body, board of regents, administrative body, board, commission, committee, subcommittee, authority, council, agency, public corporation, school board, department, division, bureau, or other subordinate unit, whether advisory or otherwise, of the state, federal, or municipal government. 7. HCS CSSB 106(FIN) wo ort naun & 6B wy = er2aBeoezres rss SFSSsRyReaneen Chapter 18 Sec. 42.45.030. LOAN ADVISORY COMMITTEE. When an application for a rural electrification loan is submitted to the department under AS 42.45.020, the department shall appoint a local advisory committee from persons residing in the area that the applicant utility is certified to serve. The loan advisory committee shall consider the loan application and shall recommend whether the loan application is to be approved or disapproved. The loan advisory committee may make a favorable recommendation only if it determines that development in the area of the proposed extension of electric service is likely to provide for full repayment of the loan under AS 42.45.020(d) within 10 years. In making that determination, the committee shall consider (1) permanence of the premises to be served by the extension; (2) land use patterns in the area; (3) access for the line that would be installed with loan proceeds; (4) availability of other utility service in the area; and (5) the economic feasibility of the extension of electric service with the proceeds of the loan. Sec. 42.45.040. SOUTHEAST ENERGY FUND. The Southeast energy fund is established as a separate fund. The fund consists of money transferred to it under AS 42.45.050. The department may make grants from the Southeast energy fund to utilities participating in the power transmission intertie between the Swan Lake and Tyee Lake hydroelectric projects for power projects, for repayment of loans, and for payments on bonds. Sec. 42.45.050. FOUR DAM POOL TRANSFER FUND. (a) The four dam pool transfer fund is established in the department. The fund consists of repayments of principal and income that would have been deposited in the former power development revolving loan fund under former AS 44.83.500. (b) Subject to appropriation, the department shall transfer the balance of the four dam pool transfer fund each month in accordance with this subsection. Subject to appropriation (1) 40 percent of the balance in the four dam pool transfer fund shall be transferred to the power cost equalization and rural electric capitalization fund to HCS CSSB 106(FIN) -8- Coen A nA & BD NY = ee ee ee Ke SCR IUABEEBRES aa ROR 27 29 31 Chapter 18 be used for power cost equalization and rural electric projects; (2) 40 percent of the balance in the four dam pool transfer fund shall be transferred to the Southeast energy fund to be used for power projects for utilities Participating in the power transmission intertie between the Swan Lake and Tyee Lake hydroelectric projects; and (3) 20 percent of the balance in the four dam pool transfer fund shall be transferred to the power project fund to be used for statewide utility projects. Sec. 42.45.060. APPROVAL BY LOAN COMMITTEE AND LEGISLATURE. (a) A loan committee consisting of seven members is established. The committee is composed of the commissioner of community and regional affairs, the commissioner of commerce and economic development, the director of management and budget, or the designees of the commissioners or the director, and four public members. (b) The public members of the committee are appointed by and serve at the pleasure of the governor. Public members serve staggered four-year terms. Only one public member may be appointed from each judicial district described in AS 22.10.010. Public members of the committee serve without compensation but are entitled to travel and per diem as provided for members of boards and commissions under AS 39.20.180. A public member of the committee serves until a successor is appointed. An appointment to fill a vacancy among the public members on the committee is for the remainder of the unexpired term. (c) The commissioner of community and regional affairs serves as chair of the committee. The committee may elect other officers as necessary. A majority of the members of the committee constitute a quorum and may exercise the powers of the committee. (d) A meeting by an electronic medium as provided in this subsection has the same legal effect as a meeting in person. The committee may meet and transact business by an electronic medium if (1) public notice of the time and locations where the meeting will be held by an electronic medium has been given in the same manner as if the meeting were held in a single location; -9- HCS CSSB 106(FIN) ~~ wo ort A vA & YN = Jaws oaoees SReRRERRS 28 Chapter 18 (2) participants and members of the public in attendance can hear and have the same right to participate in the meeting as if the meeting were conducted in person; and (3) copies of pertinent reference materials, statutes, regulations, and audio-visual materials are reasonably available to participants and to the public. (e) A member of the committee may not vote on a resolution of the committee relating to a lease or contract to be entered into by the department under this chapter if the member is a party to the lease or contract or has a direct ownership or equity interest in a firm, partnership, corporation, or association that is a party to the contract or lease. When abstaining from voting, the member must disclose the reason for the abstention. A member who is a member of an electric cooperative that is organized under or subject to AS 10.25 (Electric and Telephone Cooperative Act) may vote on a resolution relating to a contract or lease to which that cooperative is a party. The member shall disclose the cooperative membership at the time of voting. A resolution of the committee that is approved by a majority of the members present who are not barred from voting under this subsection is a valid action of the committee for all purposes. (f) Except for loans from the bulk fuel revolving loan fund (AS 42.45.250), the department shall submit the loans that the department proposes to approve under this chapter to the committee for the committee’s review. The department may not enter into a loan for an amount equal to or greater than $500,000 unless the committee approves the loan or unless the loan has received legislative approval under (g) of this section. The department may not enter into a loan for an amount less than $500,000 for a period of 30 days after submission of the proposal to the committee. If, within the 30 days, the committee notifies the department that it intends to review a loan for less than $500,000, the department may not enter into the loan unless it is approved by the committee. (g) The department may not enter into a loan for a major project unless it has legislative approval of the project and the amount. An appropriation for the loan that names the project subject to this subsection constitutes approval under this subsection. | Projects subject to legislative approval under this subsection include HCS CSSB 106(FIN) -10- eo erXI A nA & HB wR = ne 2k = = = = KFSUCSBNIABEBRES BNREREBRK 29 31 Chapter 18 (1) a project in which the cumulative state monetary involvement, through loans, grants, and bonds, is at least $5,000,000; or (2) a project for which a loan of more than $5,000,000 has been requested. ARTICLE 2. POWER COST EQUALIZATION AND RURAL ELECTRIC CAPITALIZATION. Sec. 42.45.100. POWER COST EQUALIZATION AND RURAL ELECTRIC CAPITALIZATION FUND. (a) The power cost equalization and rural electric capitalization fund is established as a separate fund for the purpose of (1) equalizing power cost per kilowatt-hour statewide at a cost close to or equal to the mean of the cost per kilowatt-hour in Anchorage, Fairbanks, and Juneau by paying money from the fund to eligible electric utilities in the state; and (2) to make grants to eligible utilities under AS 42.45.180 to improve the performance of the utility. (b) The fund shall be administered by the department as a fund distinct from the other funds of the department. The fund is composed of (1) money appropriated to provide power cost equalization to eligible electric utilities and to provide grants for utility improvements; and (2) interest earned on those appropriations. (c) The fund is not a dedicated fund. Sec. 42.45.110. ENTITLEMENT TO POWER COST EQUALIZATION. (a) The costs used to calculate the amount of power cost equalization for all electric utilities eligible under AS 42.45.100 - 42.45.150 include all allowable costs, except return on equity, used by the Alaska Public Utilities Commission to determine the revenue requirement for electric utilities subject to rate regulation under AS 42.05. The costs used in determining the power cost equalization per kilowatt-hour shall exclude any other type of assistance that reduces the customer’s costs of power on a kilowatt-hour basis and that is provided to the electric utility within 60 days before the commission determines the power cost equalization per kilowatt-hour of the electric utility. In calculating power cost equalization, the commission may not consider validated costs or kilowatt-hour sales associated with a United States Department of -11- HCS CSSB 106(FIN) wo ent A A & | we = — — eraanwroaonres SSReSrrt_ReERRERBRESS 31 Chapter 18 Defense facility. (b) An eligible electric utility is entitled to receive power cost equalization (1) for sales of power to local community facilities, calculated in the aggregate for each community served by the electric utility, for actual consumption of not more than 70 kilowatt-hours per month for each resident of the community; the number of community residents shall be determined under AS 29.60.020; and (2) for actual consumption of not more than 700 kilowatt-hours per month sold to each customer in all classes served by the electric utility except (A) customers of the utility under (1) of this subsection; and (B) customers that are state or federal offices or state or federal facilities other than public schools. (c) The amount of power cost equalization provided per kilowatt-hour under (b) of this section may not exceed 95 percent of the power costs, or the average rate per eligible kilowatt-hour sold, whichever is less, as determined by the department. However, (1) during the state fiscal year that began July 1, 1993, the power costs for which power cost equalization were paid to an electric utility were limited to minimum power costs of more than 9.5 cents per kilowatt-hour and less than 52.5 cents per kilowatt-hour, (2) during each following state fiscal year, the department shall adjust the power costs for which power cost equalization may be paid to an electric utility based on the weighted average retail residential rate in Anchorage, Fairbanks, and Juneau; and (3) the power cost equalization per kilowatt-hour may be determined for a utility without historical kilowatt-hour sales data by using kilowatt-hours generated. (d) An electric utiliry whose customers receive power cost equalization under AS 42.45.100 - 42.45.150 shall set out in its tariff the rates without the power cost equalization and the amount of power cost equalization per kilowatt-hour sold. The rate charged to the customer shall be the difference Between the two amounts. Power cost equalization paid under AS 42.45.100 - 42.45.150 shall be used to reduce the cost HCS CSSB 106(FIN) -12- wo mens nanaunerkwenr = — mt pee QaaueROR ES Chapter 18 of all power sold to local community facilities, in the aggregate, to the extent of 70 kilowart-hours per month per resident of the community, and to reduce the cost of the first 700 kilowatt-hours per customer per month for all other classes served by the electric utility except state and federal offices and state and federal facilities other than public schools. (e) The power cost equalization program shall be administered by the department based on a determination by the department under (a) and (c) of this section of power cost equalization per kilowatt-hour for each eligible electric utility. (f) The department may not deny an eligible electric utility power cost equalization because complete cost information is not available. The department shall assist an eligible electric utility that is exempt from rate regulation under AS 42.05 to provide the cost information the department considers necessary to comply with AS 42.45.100 - 42.45.150. Only power costs that are supportable may be considered in calculating power cost equalization. Each electric utility is responsible for keeping records that provide the information necessary to comply with AS 42.45.100 - 42.45.150 including records of monthly kilowatt-hour sales or generation, monthly fuel balances, fuel purchases, and monthly utility fuel consumption. * (g) The department shall determine the cost of fuel for each eligible electric utility using the procedure for approving fuel cost rate adjustments of electric utilities subject to rate regulation under AS 42.05. (h) Each electric utility receiving power cost equalization approved by the department shall (1) report monthly to the department within the time and in the form the department requires; and (2) use operational equipment designed to meter individual utility customer power consumption and to determine and record the utility’s overall fuel consumption. (i) The department shall review the report required under (h) of this section. After review and approval of the report, the department shall, subject to appropriation, pay to each eligible electric utility an amount equal to the power cost equalization per kilowatt-hour determined under (a) and (c) of this section, multiplied by the number -13- HCS CSSB 106(FIN) wo ert A nA & &Y WY = nu,Y = — = et eet SSseexeriaBREEBRES RRREBORE 27 29 31 Chapter 18 of kilowatt-hours eligible for power cost equalization that were sold during the preceding month to all customers of the utility under (b) of this section. Payment shall be made by the department within 30 days after receipt from the utility of the report required under (h) of this section. If appropriations are insufficient for payment in full, the amount Paid to each electric utility is reduced on a pro rata basis. Sec. 42.45.120. NOTICE TO CUSTOMERS. [If an electric utility receives power cost equalization under AS 42.45.100 - 42.45.150, the utility shall either give to its electric service customers eligible under this program, for each period for which the payment is received, (1) the following notice: NOTICE TO CUSTOMER For the current billing period the utility will be paid under the State of Alaska’s power cost equalization program (AS 42.45.100) to assist the utility and its customers in reducing the high cost of generation of electric energy. Your total electrical service cost Sue aus Less state equalization Se Your charge Soe. ; or (2) a notice approved by the department that provides electric service Customers the same information provided by the notice in (1) of this section. Sec. 42.45.130. COST MINIMIZATION. (a) In order to qualify for power cost equalization, each electric utility shall make every reasonable effort to minimize administrative, operating, and overhead costs, including using the best available technology consistent with sound utility management practices. In reviewing applications for power cost equalization, the department may require the elimination of unnecessary operating expenses. Each eligible electric utility shall cooperate with appropriate state agencies to implement cost-effective energy conservation measures and to plan for and implement feasible alternatives to diesel generation. (b) In this section, “energy conservation measures” include weatherization and other insulating methods, utilization of waste heat, appropriate sizing of new generating equipment, and other programs of the state or federal government intended and HCS CSSB 106(FIN) -14- eo mPrnNI An & BW we = yn Ne = = = ~ os Il) |, <0 jl ean eam lal) 5) bes tos leas RRESRB 27 29 31 Chapter 18 available for energy conservation. Sec. 42.45.140. CUSTOMER PETITIONS. If the department receives a petition requesting power cost equalization, signed by at least 25 percent of the customers of an electric utility that is subject to rate regulation under AS 42.05 and that has not applied for power cost equalization under AS 42.45.100 - 42.45.150, the department shall require the utility to submit a power cost equalization application. Upon a determination of eligibility for power cost equalization, the utility, as a part of its service, shall receive power cost equalization and pass power cost equalization benefits to its customers under AS 42.45.100 - 42.45.150. Sec. 42.45.150. DEFINITIONS FOR AS 42.45.100- 42.45.150. In AS 42.45.100 - 42.45.150, (1) “community facility” means a water and sewer facility, public outdoor lighting, charitable educational facility, or community building whose Operations are not paid for by the state, the federal government, or private commercial interests; (2) "eligible electric utility” or “electric utility” means a public, cooperative, or other corporation, company, individual, or association of individuals, and includes the lessees, trustees, or receivers appointed by a court, that (A) owns, operates, manages, or controls a plant or system for the furnishing, by generation, transmission or distribution, of electric service to the public for compensation; (B) during calendar year 1983, had a residential consumption level of power eligible for power cost equalization under former AS 44.83 of less than 7,500 megawatt hours or had a residential consumption level of power eligible for power cost equalization under former AS 44.83 of less than 15,000 megawatt hours if the utility served two or more municipalities or unincorporated communities, and (C) during calendar year 1984, used diesel fired generators to produce more than 75 percent of the electrical consumption of the utility; an electric utility that is a subsidiary of another electric utility is an “eligible electric utility" if the operations of the subsidiary, considered separately, meet -15- HCS CSSB 106(FIN) wo eri aAaun sk |] re = Nu NOOO ee eee -m OO OY AU & YS KR KS S&S RREBB 27 29 31 Chapter 18 the eligibility requirements of AS 42.45.100 - 42.45.150; if an electric utility did not receive power cost assistance in 1983 but is otherwise eligible for power cost equalization under AS 42.45.100 - 42.45.150, the utility is an “eligible electric utility"; (3) “power costs" means costs used in determining power cost equalization under AS 42.45.110(a) and (c). Sec. 42.45.160. ADJUSTMENTS TO POWER COST EQUALIZATION. (a) The commission may adjust the power cost equalization per kilowatt-hour, determined under AS 42.45.100 - 42.45.150, payable to an electric utility that is subject to rate regulation under AS 42.05 if the (1) commission has approved a fuel cost rate adjustment caused by an increase or decrease in the electric utility’s cost of fuel; (2) commission has approved a permanent or interim rate increase or decrease that establishes a higher or lower power cost, (3) authority has discovered, in reviewing the monthly data submitted by the electric utility, discrepancies that require adjustment of the power cost equalization; or (4) authority determines that appropriations are insufficient to finance full payments to eligible electric utilities. (b) An electric utility that is eligible to receive power cost equalization under this section and that receives power cost equalization per kilowatt-hour approved by the department shall report monthly to the department within the time and in the form the department requires. An electric utility shall report (1) the power cost equalization per kilowatt-hour approved by the department, (2) the total kilowatt-hours sold to each class of customer during the preceding month; (3) -the total kilowatt-hours eligible for power cost equalization under this section sold to each class of customer during the preceding month; (4) the total kilowatt-hours generated during the preceding month, if available; HCS CSSB 106(FIN) -16- we Boni AnuA & HD NY = Nn bY N Ne NNO ee BNRRERRRBRRFESVPRVIRBDAEEKRES 29 31 Chapter 18 (5) any department approved amendments to the schedule of rates in effect during the preceding month; and (6) an increase or decrease in the current unit price of fuel from the base price used by the department in determining power costs if the change is expected to result in a subsequent power cost equalization adjustment. (c) The provisions of AS 42.45.100 - 42.45.150 relating to the determination of the amount of power cost equalization and payment of the equalization assistance apply to equalization assistance under this section. Sec. 42.45.170. EQUALIZATION ASSISTANCE TO UNREGULATED UTILITIES. (a) An electric utility that is not subject to rate regulation by the Alaska Public Utilities Commission under AS 42.05 may receive power cost equalization if the utility is otherwise eligible for equalization assistance under AS 42.45.100 - 42.45.150 and if the utility (1) files with the department financial data necessary to determine the power cost equalization per kilowatt-hour as prescribed by the department and that is in compliance with AS 42.45.100 - 42.45.150; (2) reports monthly to the department, within the time and in the form required, the information required in (b) of this section; (3) sets rates (A) that consider the power cost equalization provided under AS 42.45.100 - 42.45.150 by subtracting from its revenue requirements for electric services the power cost equalization per kilowatt-hour that it is eligible to receive; and (B) under which the power cost equalization provided in AS 42.45.060 - 42.45.110 is applied as a credit only against the cost of kilowatt-hours eligible for equalization assistance under AS 42.45.100 - 42.45.150 that are consumed by each customer in any month; (4) allows audits that the department determines are necessary to ensure compliance with this section; and (5) furnishes its electric service customers eligible under this program a notice as specified in AS 42.45.120. -17- HCS CSSB 106(FIN) wernt nanan & ’YWN = oe _= lh QaeweeBEaOR ES SSRENRERPERORLSSES 31 Chapter 18 (b) An electric utility that is eligible to receive power cost equalization under this section shall report in accordance with (a)(2) of this section (1) the power cost equalization per kilowatt-hour approved by the department, (2) the total kilowatt-hours sold to each class of customer during the preceding month; (3) the total kilowatt-hours eligible for power cost equalization under this section sold to each class of customer during the preceding month; (4) the total kilowatt-hours generated during the preceding month, if available; (5S) any amendments to the schedule of rates in effect during the preceding month; and (6) an increase or decrease in the current unit price of fuel from the base price used by the department in determining power costs if the change is expected to result in a subsequent equalization assistance level adjustment. (c) An electric utility that is eligible to receive power cost equalization under this section may have its power cost equalization per kilowatt-hour determination changed by the department if the department (1) has verified an increase or decrease in the electric utility’s cost of fuel; (2) has verified an increase in rates based on an increase in costs; (3) has discovered, in reviewing the monthly data submitted by the electric utility, discrepancies that require adjustment of the power cost equalization; or (4) determines that appropriations are insufficient to finance full payments to eligible electric utilities. (d) The provisions of AS 42.45.100 - 42.45.150 relating to the determination of the amount of power cost equalization and payment of the equalization assistance apply to equalization assistance under this section. (e) An application for power cost equalization by an electric utility that is eligible to receive power cost under this section does not extend the jurisdiction of the Alaska Public Utilities Commission beyond that established by AS 42.05. HCS CSSB 106(FIN) -18- eo ert nan & |S we = eee es eeriawnaauone ss FBSSRBHRREBOREB Chapter 18 Sec. 42.45.180. GRANTS FOR UTILITY IMPROVEMENTS. (a) The department may make a grant from the fund for an eligible utility for a small power project that will reduce the cost of generating or transmitting power to the customers of the utility. The amount of the grant may not exceed 75 percent of the cost of the project. The department may not make a grant under this section unless the eligible utility has secured financing for 25 percent of the cost of the project from a source other than the power cost equalization and rural electric capitalization fund, as provided under (c) of this section. (b) The department may not allocate more than three percent of the balance in the fund to grants under this section in a fiscal year. (c) In determining whether an eligible utility has secured financing for 25 percent of the cost of the project from a source other than the power cost equalization and rural electric capitalization fund, the department shall accept solicited and unsolicited proposals for third party financing or for a joint venture between the utility and an entity from the private sector provided that the private sector participant has (1) a valid state business license; (2) a resolution or letter of agreement executed by the eligible utility agreeing to participation by the private sector participant, (3) a business plan that illustrates how the proposed project will reduce the cost of generating or transmitting power to the customers of the utility. (d) In this section, (1) “eligible utility” has the meaning given in AS 42.45.150; (2) “project” includes (A) power generation systems; (B) transmission systems; (C) distribution systems; (D) metering systems; (E) energy store systems; (F) energy conservation programs; and (G) bulk fuel storage facilities; (3) “small power project" means a new or modified project that will -19- HCS CSSB 106(FIN) wert nan & WN = _ = _ Saaesreaoegzes BNRRREBRESSS 29 31 Chapter 18 either generate, store, or conserve no more than 1.5 megawatts of power or provide a metering system, transmission system, distribution system, or bulk fuel storage facility that has an estimated cost of less than $3,000,000. Sec. 42.45.190. DEFINITION FOR AS 42.45.100 - 42.45.190. In AS 42.45.100 - 42.45.190, "fund" means the power cost equalization and rural electric capitalization fund established under AS 42.45.100. ARTICLE 3. ELECTRICAL SERVICE EXTENSION FUND. Sec. 42.45.200. ELECTRICAL SERVICE EXTENSION FUND ESTABLISHED. (a) The electrical service extension fund is established as a separate fund in the department. The fund consists only of money appropriated to it by the legislature. (b) The department may make grants from the electrical service extension fund to certificated electric utilities and to electric utilities exempt from certification under AS 42.05.711, as a first priority, to pay for costs of site preparation and construction for the extension of electrical service to private residences and small businesses not currently served by an electric utility and, as a second priority, for making improvements to existing utilities. The amount of a grant made under this section may not exceed 60 percent of the total cost of construction of the project. The costs considered in making a grant may not include costs of planning, feasibility studies, or design. (c) An electric utility that has received a grant under this section may charge a connection fee for initial connection to the electrical service made available because of the construction. The connection fee for each residential or commercial structure shall conform to the line extension policy of the utility. (d) The department shall adopt regulations under AS 44.62 (Administrative Procedure Act) to implement this section. (e) In this section, "certificated" means holding a certificate of public convenience and necessity issued by the Alaska Public Utilities Commission under AS 42.05. ARTICLE 4. BULK FUEL REVOLVING LOAN FUND. Sec. 42.45.250. BULK FUEL REVOLVING LOAN FUND. (a) The bulk fuel HCS CSSB 106(FIN) -20- Co6o mPmnNt An & BN = Se eet ett 5 LOB <8, x) ent) au || a3) bas) SSRVRERPEEORE w —e S Chapter 18 revolving loan fund is established in the department to assist communities in purchasing bulk fuel. A community, or a private individual who has written endorsement from the governing body of the community, is eligible for a loan from the bulk fuel revolving loan fund for a bulk fuel purchase. (b) Money in the fund may be used by the legislature to make appropriations for costs of administering this section. (c) The foreclosure expense account is established as a special account within the bulk fuel revolving loan fund. This account is established as a reserve from fund equity. (d) The department may spend money credited to the foreclosure expense account when necessary to protect the state’s security interest in collateral on loans made under this section or to defray expenses incurred during foreclosure proceedings after a default by an obligor. (e) Loans made from the bulk fuel revolving loan fund to one borrower in any fiscal year are not subject to AS 42.45.060 and (1) may not exceed $100,000; (2) shall be repaid in one year or less; and (3) may not exceed 90 percent of the wholesale price of the fuel purchased. (f) Interest may be charged on a loan made from the bulk fuel revolving loan fund. Interest shall be charged on a loan at a rate equal to the percentage of the average weekly yield of municipal bonds for the 12 months preceding the date of the loan, as determined by the department from municipal bond yield rates reported in the 30-year revenue index of the Weekly Bond Buyer. However, if the department finds that a community cannot afford to repay a portion of interest on a loan, and makes a determination in writing, the department may reduce or eliminate the interest rate applicable to the loan. (g) Repayments of the principal, the interest, and the money chargeable to principal or interest that is collected through liquidation by foreclosure or other process on a loan made under this section shall be paid into the bulk fuel revolving loan fund. The fund is not a dedicated fund. -21- HCS CSSB 106(FIN) we ewer nun & |YW Ww = eee tt woeonrnrtauwnesk |n KS SO RRREBRES 27 29 31 Chapter 18 (h) The department may contract for the administration of the bulk fuel loan program established in this section. (i) The department shall dispose of property acquired through default or foreclosure of a loan made under this section. Disposal shall be made in a manner that serves the best interests of the state, and may include the amortization of payments over a period of years. (j) The department may adopt regulations necessary to carry out the provisions of this section, including regulations to establish reasonable fees for services provided and charges for collecting the fees. (k) The department may collect the fees and collection charges established under (i) of this section and shall deposit the money in the general fund. (1) In this section, (1) “bulk fuel storage facility” means a storage tank capable of holding at least 10,000 gallons of petroleum fuel; and (2) “community” means an organized municipality or an unincorporated village that is a social unit, with a population of less than 2,000 people. ARTICLE 5. JOINT ACTION AGENCIES. Sec. 42.45.300. JOINT ACTION AGENCIES. Two or more public utilities may form a joint action agency for the purpose of participation in the design, construction, operation, and maintenance of a generating or transmission facility and to secure financing for carrying out the design, construction, operation, and maintenance of the facility. A joint action agency may request the Alaska Industrial Development and Export Authority to issue revenue bonds for projects of the agency. A joint action agency has the powers of a public utility under AS 42.05. ARTICLE 6. MISCELLANEOUS PROVISIONS. Sec. 42.45.400. ASSISTANCE TO RURAL UTILITIES. The department shall provide technical assistance to rural utilities including catastrophe prevention programs and other training programs for utility projects. The department shall provide rural utilities with the technical assistance and training that the utilities need to improve the efficiency, safety, and reliability of their power systems and to prevent emergency situations from developing. At a minimum, the assistance and training must include HCS CSSB 106(FIN) -22- eo Bor A BR & WYN = — SIAR SEGRES SSREUVREREBREBS 31 Chapter 18 information on (1) reducing distribution line losses; (2) installation of generators that are more fue! efficient, (3) preventative maintenance programs; (4) safety inspections; (5) installing and maintaining waste heat systems; (6) improved metering systems; (7) improved management and administration; and (8) coordinating regional activities, including circuit rider maintenance programs. (b) In providing rural utilities with technical assistance and training, the department shall give priority to contracting with the private sector for these services. Sec. 42.45.410. RELATIONSHIP WITH PRIVATE SECTOR. The department shall, to the maximum extent feasible, carry out its powers and duties under this chapter by entering into contracts with appropriate entities in the private sector. ARTICLE 7. GENERAL PROVISIONS. Sec. 42.45.990. DEFINITIONS. In this chapter, unless the context otherwise requires, (1) “department” means the Department of Community and Regional Affairs; (2) “feasibility study” (A) means a study conducted to establish the economic and environmental practicality of completing a proposed power project; (B) includes engineering and design work to meet the requirements for submission of a license application for a proposed new project to the Federal Energy Regulatory Commission; (3) “power” includes electrical energy generated, distributed, bought, or sold for lighting, heating, power, and every other useful purpose; (4) “power project" or "project" means a plant, works, system, or facility, together with related or necessary facilities and appurtenances, including a divided or undivided interest in or a right to the capacity of a power project or project, -23- HCS CSSB 106(FIN) wo ert A A & YH = nuoFe = = = — SSVCaeraBeEeoeweEsS RBRRBBE 27 29 31 Chapter 18 that is used or is useful for the purpose of (A) electrical or thermal energy production other than nuclear ( energy production; (B) waste energy utilization and energy conservation; or (C) transmission, purchase, sale, exchange, and interchange of electrical or thermal energy, including district heating or interties; (5) “reconnaissance study" means a study conducted to assess the present and future electrical and thermal energy needs of an area. * Sec. 6. AS 44.47.050(a) is amended to read: (a) The department may (1) advise and assist local governments; (2) serve as staff for the Local Boundary Commission; (3) conduct studies and carry out experimental and pilot projects for the purpose of developing solutions to community and regional problems; (4) promote cooperative solutions to problems affecting more than one community or region, including joint service agreements, regional compacts, and other forms of cooperation; (5) serve as a clearinghouse for information useful in solution of community and regional problems, and channel to the appropriate authority requests for information and services; (6) advise and assist community and regional governments on matters of finance, including but not limited to bond marketing and procurement of federal funds; (7) prepare suggested guidelines relating to the content of notice of bond sale advertisements, prospectuses, and other bonding matters issued by local governments; (8) administer state funds appropriated for the benefit of unorganized regions within the state, allowing for maximum participation by local advisory councils and similar bodies; (9) carry out those administrative functions in the unorganized borough ( that the legislature may prescribe; HCS CSSB 106(FIN) -24- wo ent A nA & BD we = Net SevearianesreBnzs BYVRERRESORR ES 8 Chapter 18 (10) study existing and proposed laws and state activities that affect community and regional affairs and submit to the governor recommended changes in those laws and activities; (11) coordinate activities of the state that affect community and regional affairs; (12) assist in the development of new communities and serve as the agent of the state for purposes of participation in federal programs relating to new communities; (13) supervise planning, management, and other activities required for local eligibility for financial aid under those federal and state programs that [WHICH] provide assistance to community and regional govetnments; (14) administer state and, as appropriate, federal programs for revenue sharing, grants, and other forms of financial assistance to community and regional governments; (15) provide staff assistance, as requested, to the Rural Affairs Commission; (16) apply for, receive, and use funds from federal and other sources, public or private, for use in carrying out the powers and duties of the department; (17) request and utilize the resources of other agencies of state government in carrying out the purposes of this chapter to the extent such utilization is more efficient than maintaining departmental staff, reimbursing the other agencies when appropriate; (18) [REPEALED (19)] advise and assist municipalities on procedures of assessment, valuation, and taxation, and notify municipalities of major errors in those procedures; {19)_carry out the powers and duties assigned it under AS 42.45; (20) carry out other functions and duties, consistent with law, necessary or appropriate to accomplish the purpose of this chapter. * Sec. 7. AS 44.83.030 is repealed and reenacted to read: Sec. 44.83.030. MEMBERSHIP OF THE AUTHORITY. The directors of the Alaska Energy Authority are the members of the Alaska Industrial Development and -25- HCS CSSB 106(FIN) wo ert Au & Y’N = — eriakaanres SFSSRNVEREBRESS Chapter 18 Export Authority. * Sec. 8 AS 44.83.040(a) is amended to read: (a) The chair and vice-chair of the Alaska Industrial Development and x A A i [DIRECTORS SHALL ELECT ONE OF THEIR NUMBER AS CHAIRMAN AND MAY ELECT OTHER OFFICERS THEY DETERMINE DESIRABLE]. The powers of the Alaska Energy Authority [AUTHORITY] are vested in the directors, and three [FOUR] directors of the authority constitute a quorum. Action may be taken and motions and resolutions adopted by the Alaska Energy Authority [AUTHORITY] at a meeting by the affirmative vote of a majority of the directors. The directors of the Alaska Energy Authority [AUTHORITY] serve without compensation, but they shall receive the same travel pay and per diem as provided by law for board members under AS 39.20.1809. * Sec. 9. AS 44.83.070 is amended to read: Sec. 44.83.070. PURPOSE OF THE AUTHORITY. The purpose of the authority is to promote, develop, and advance the general prosperity and economic welfare of the people of the state by providing a means of (CONSTRUCTING, ACQUIRING, ] financing and operating power projects and facilities that recover and use waste energy. * Sec. 10. AS 44.83.080 is amended to read: Sec. 44.83.080. POWERS OF THE AUTHORITY. In furtherance of its Corporate purposes, the authority has the following powers in addition to its other powers: (1) to sue and be sued; (2) to have a seal and alter it at pleasure; (3) to make and alter bylaws for its organization and internal management, (4) to adopt regulations governing the exercise of its corporate powers; (5) tw [ACQUIRE, WHETHER BY CONSTRUCTION, PURCHASE, GIFT OR LEASE, AND TO] improve, equip, operate, and maintain power projects; (6) to issue bonds to carry out any of its corporate purposes and HCS CSSB 106(FIN) -26- eo earn Aun & B&B we = — me 3AaaQRGRES Chapter 18 powers, including [THE ACQUISITION OR CONSTRUCTION OF A PROJECT TO BE OWNED OR LEASED, AS LESSOR OR LESSEE, BY THE AUTHORITY, OR BY ANOTHER PERSON, OR THE ACQUISITION OF ANY INTEREST IN A PROJECT OR ANY RIGHT TO CAPACITY OF A PROJECT,] the establishment or increase of reserves to secure or to pay the bonds or interest on them, and the payment of all other costs or expenses of the authority incident to and necessary or convenient to Carry out its corporate purposes and powers; (7) to sell, lease as lessor or lessee, exchange, donate, convey, or encumber in any manner by mortgage or by creation of any other security interest, real or personal property owned by it, or in which it has an interest, when, in the judgment of the authority, the action is in furtherance of its corporate purposes; (8) to accept gifts, grants, or loans from, and enter into contracts or other transactions regarding them, with any person; (9) ww deposit or invest its funds, subject to agreements with bondholders; (10) to enter into contracts with the United States or any person and, subject to the laws of the United States and subject to concurrence of the legislature, with a foreign country or its agencies, for the financing, (CONSTRUCTION, ACQUISITION, ] operation, and maintenance of all or any part of a power project, either inside or outside the state, and for the sale or transmission of power from a project or any right to the capacity of it or for the security of any bonds of the authority issued or to be issued for the project, (11) to enter into contracts with any person and with the United States, and, subject to the laws of the United States and subject to the concurrence of the legislature, with a foreign country or its agencies for the purchase, sale, exchange, transmission, or use of power from a project, or any right to the capacity of it; (12) to apply to the appropriate agencies of the state, the United States, and to a foreign country and any other proper agency for the permits, licenses, or approvals as may be necessary, and to [CONSTRUCT,] maintain and operate power projects in accordance with the licenses or permits, and to obtain, hold, and use the licenses and permits in the same manner as any other person or operating unit; -27- HCS CSSB 106(FIN) wo ert aun e& |6 nN = SeIAaBDEEORES RRREBEREES 27 29 31 Chapter 18 (13) [TO PERFORM RECONNAISSANCE STUDEES, FEASIBILITY STUDIES, AND ENGINEERING AND DESIGN WITH RESPECT TO POWER PROJECTS; (14)] to enter into contracts or agreements with respect to the exercise of any of its powers, and do all things necessary or convenient to carry out its corporate purposes and exercise the powers granted in this chapter, (14) [(15) TO EXERCISE THE POWER OF EMINENT DOMAIN IN ACCORDANCE WITH AS 09.55.240 - 09.55.460; (16)] to recommend to the legislature (A) (THE ISSUANCE OF GENERAL OBLIGATION BONDS OF THE STATE TO FINANCE THE CONSTRUCTION OF A POWER PROJECT IF THE AUTHORITY FIRST DETERMINES THAT THE PROJECT CANNOT BE FINANCED BY REVENUE BONDS OF THE AUTHORITY AT REASONABLE RATES OF INTEREST; (B)] the pledge of the credit of the state to guarantee repayment of all or any portion of revenue bonds issued to assist in construction of power Projects; (B) [(C)] an appropriation from the general fund (i) for debt service on bonds or other project purposes; (ii) to reduce the amount of debt financing for the Project, {() AN APPROPRIATION TO THE POWER PROJECT FUND FOR A POWER PROJECT; (E) REPEALED (F) DEVELOPMENT OF A PROJECT UNDER FINANCING ARRANGEMENTS WITH OTHER ENTITIES USING LEVERAGED LEASES OR OTHER FINANCING METHODS; (G) AN APPROPRIATION FOR A POWER PROJECT ACQUIRED OR CONSTRUCTED UNDER AS 44.83.380 - 44.83.425 (ENERGY PROGRAM FOR ALASKA)]. HCS CSSB 106(FIN) -28- ( wo enNI ADAnN & BN = Se eet Sr2rABRROHRES SSRBUVRERERBRE SS 31 “= Chapter 18 * Sec. 11. AS 44.83.090(a) is amended to read: (a) The authority shall, in addition to the other methods that [WHICH] it may find advantageous, provide a method by which municipal electric, rural electric, cooperative electric, or private electric utilities and regional electric authorities, or other persons authorized by law to engage in the distribution of electricity may secure a reasonable share of the power generated by a project, or any interest in a project, or for any right to the power and shall sell the power or cause the power to be sold at the lowest reasonable prices that [WHICH] cover the full cost of the electricity or services, including capital and operating costs, debt coverage as considered appropriate by the authority, and other charges that may be authorized by this chapter. Except for a contract or lease entered into under former AS 44.83.380 - 44.83.425, a contract or lease for the sale, transmission, and distribution of power generated by a project or any right to the capacity of it shall provide: (1) for payment of all operating and maintenance expenses of a project and costs of renewals, replacements, and improvements of it; (2) for interest on and amortization charges sufficient to retire bonds of the authority issued for the project and reserves for them, plus a debt service coverage factor as may be determined by the authority to be necessary for the marketability of its bonds; (3) for monitoring of the project by the authority or its agents; (4) for full and complete disclosure to the authority of all factors of costs in the transmission and distribution of power, so that rates to any persons may be fixed initially in the contract or lease and may be adjusted from time to time on the basis of true cost data; (5) for periodic revisions of the service and rates to persons on the basis of accurate cost data obtained by the accounting methods and systems approved by the directors and in furtherance and effectuation of the policy declared in this chapter, (6) for the cancellation and termination of a contract or lease upon violation of its terms by any person; (7) for security for performance as the. authority may consider -29- HCS CSSB 106(FIN) Co ert A nA & YWN = 10 11 12 14 15 16 17 18 19 RREBOBRES 27 29 31 Chapter 18 practicable and advisable, including provisions assuring the continuance of the distribution and transmission of power generated by a project and the use of its facilities for these purposes; and (8) other terms not inconsistent with the provisions and policy of this chapter as the authority may consider advisable. * Sec. 12. AS 44.83.110(b) is amended to read: (b) Notwithstanding any other provisions of this chapter, the trust indenture, trust agreement, secured loan agreement, or other instrument or the resolution constituting a contract with bondholders shall contain a covenant by the authority that it will at all times maintain rates, fees, or charges sufficient to pay, and that a contract entered into by the authority for the sale, transmission, or distribution of power shall contain rates, fees, or charges sufficient to pay the costs of operation and maintenance of the project, the principal of and interest on bonds issued under the trust agreement as the same severally become due and payable, to provide for debt service coverage as considered necessary by the authority for the marketing of its bonds and to provide for renewals, replacements, and improvements of the project, and to maintain reserves required ‘by the terms of the trust agreement. This subsection does not require a covenant that varies from a covenant entered into in accordance with the provisions of former AS 44.83.380 - 44.83.425. * Sec. 13. AS 44.83.382(a) is amended to read: (a) A power development fund is established in the Alaska Energy Authority to carry out the purposes of former AS 44.83.380 - 44.83.425. * Sec. 14. AS 44.83.384(a) is amended to read: (a) The fund may be used by the authority to provide money for (1) [RECONNAISSANCE AND FEASIBILITY STUDIES AND POWER PROJECT FINANCE PLANS PREPARED UNDER AS 44.83.177 - 44.83.181; (2) THE COST OF A POWER PROJECT, INCLUDING BUT NOT LIMITED TO COSTS OF ACQUIRING NECESSARY LICENSES, PREPARING ENGINEERING DESIGNS, OBTAINING LAND, AND CONSTRUCTING THE POWER PROJECT; HCS CSSB 106(FIN) -30- wo emerninawn B® &B NY = w wv aes) re mon Ww FSRBRBNRRERREOREREKTVPRIWIRBEBSHE AS Chapter 18 (3)] the defeasance of bonds, or the payment of debt service on loans for or on an issue of bonds sold in connection with a power project constructed or acquired before the effective date of this section; (2) [(4)] _ the cost of operating and maintaining power projects constructed or acquired before the effective date of this section; and ) [(5)] debt service on power projects constructed or acquired before the effective date of this section. * Sec. 15. AS 44.83.388(a) is amended to read: (a) The authority shall maintain records of power project allocations from the fund for each power project (1) approved in accordance with former AS 44.83.185; and (2) for which an allocation is made from an appropriation made by the legislature without specifying an appropriation to a project. * Sec. 16. AS 44.83.396(a) is amended to read: (a) A power project that was [IS] acquired or constructed as part of the former energy program for Alaska is owned, and shall be administered, by the authority. * Sec. 17. AS 44.83.398(a) is amended to read: (a) The authority shall sell power produced from power projects acquired or constructed under the former energy program for Alaska. For purposes of this section, Tyee Lake, Swan Lake, Solomon Gulch, and Terror Lake hydroelectric facilities are considered to be one power project. This power project is referred to as the initial project. * Sec. 18. AS 44.83.398(f) is amended to read: (f) The provisions of (b) of this section do not apply to an intertie that is authorized as a separate project under former AS 44.83.380. The authority shail establish and maintain separate power rate schedules applicable to each intertie that it has acquired or constructed as a separate power project under the energy program for Alaska. The power rate schedules shall produce sufficient revenue from utilities connected by the intertie to pay (1) operation, maintenance, and equipment replacement costs of the intertie; (2) debt service of the intertie; and (3) safety inspections and -31- HCS CSSB 106(FIN) wo ert A uA & |B NY = Cee IADR REGARES RRERBRES 27 29 31 Chapter 18 investigations of the intertie by the authority. If the authority determines that an intertie has ceased to function as a separate project and has become a part of one or more other power projects as a transmission line, the power rate schedules established under this subsection shall be terminated and a wholesale power rate applicable to the former intertie shall be calculated under (b) of this section for the project or Projects of which it has become a part. * Sec. 19. AS 44.83.510(a) is amended to read: (a) [THE AUTHORITY MAY BORROW FROM THE FUND FOR THE PURPOSE OF FINANCING A POWER PROJECT ACQUIRED OR CONSTRUCTED BY THE AUTHORITY UNDER THE ENERGY PROGRAM FOR ALASKA (AS 44.83.380 - 44.83.425).] Repayment of a loan from the former power development revolving loan fund must be made with the proceeds from the sale of power from projects in the former energy program for Alaska. Except as provided in AS 44.83.398(i), the payments required to be made by the authority on a loan from the fund constitute debt service for the purpose of calculating the wholesale power rate in AS 44.83.398(b)(1). * Sec. 20. AS 44.83.530 is amended to read: Sec. 44.83.530. DEFINITIONS. In AS 44.83.500 - 44.83.530, (1) “fund” means the former power development revolving loan fund; and (2) “power project” means a project acquired or constructed under the former energy program for Alaska, AS 44.83.380 - 44.83.425. * Sec. 21. AS 44.83.930(a) is amended to read: (a) When a project is operated by the authority, the authority shall enter into one or more contracts for the sale of electrical power, energy, transmission capacity, or service from the project. Unless the contract is entered into under former AS 44.83.380 - 44.83.425, a contract entered into under this section must meet all requirements of AS 44.83.090. * Sec. 22. AS 44.83.990(3) is amended to read: (3) “feasibility study" (A) means a study conducted for the purpose of establishing the HCS CSSB 106(FIN) -32- wo ert An & YN = ee ee — BSCS IVAKREOARKRES RREGB Chapter 18 economic and environmental practicality of completing a proposed power project under former AS 44.83.181; (B) includes engineering and design work to meet the requirements for submission of a license application for a proposed new project to the Federal Energy Regulatory Commission; * Sec. 23. AS 44.88.105(d) is amended to read: (d) The chairman of the authority shall annually, no later than January 2, certify in writing to the governor and the legislature the amount, if any, required to restore a capital reserve fund to the capital reserve fund requirement. The legislature may appropriate to the authority the amount certified by the chairman of the authority. The authority shall deposit the amounts appropriated under this subsection during a fiscal year in the proper capital reserve fund. Nothing in this section creates a debt or liability of the state. In this subsection, “capital reserve fund” means a capital reserve fund that (1) is created under this section on or before January 1, 1989; [, OR] (2) secures refunding bonds if the refunding bonds are issued to refund bonds that are secured by a capital reserve fund created under this section on or before January 1, 1989; or fter effective dat this section for a power transmission intertie. * Sec. 24. AS 44.88.155(d) is amended to read: (d) A loan participation purchased by the authority with assets of the enterprise development account or with proceeds of bonds secured by assets of the enterprise development account (1) may not exceed $10,000,000; however, in the case of a loan for a power transmissios tie, the loan participation ma d (2) may not be purchased unless (A) the project applicant is not, or, if the applicant is not a single proprietorship, all members of the business enterprise or enterprises constituting the project applicant are not, in default on another loan made by -33- HCS CSSB 106(FIN) we or anaunek vein = _= erianwrteares SSsRBYURRREEORESS Chapter 18 the state or by a public corporation of the state; and (B) at least 20 percent of the principal amount of the loan is retained by the loan originator, (3) may not be purchased if the loan to be purchased exceeds the cost of the project or 75 percent of the appraised value of the project, whichever is less, unless the amount of the loan in excess of this limit is federally insured or guaranteed or is insured by a qualified mortgage insurance company; (4) may not be purchased if the participation in the loan to be purchased is for a term longer than three-quarters of the authority’s estimate of the life of the project or 25 years from the date the loan is made, whichever is earlier, (5) may be made only if the participation in the loan to be purchased contains amortization provisions; the amortization provisions (A) must be complete and satisfactory to the authority and require periodic payments by the borrower, (B) may allow the loan originator to amortize the portion of the loan retained by the loan originator using a shorter amortization schedule than the amortization schedule for the portion of the loan held by the authority if (i) in the authority’s opinion, the project financed can support the increased debt service; and (ii) the accelerated amortization schedule is required to induce the originator to make the loan; (6) may be made only if the participation in the loan to be purchased is in the form and contains the terms and provisions with respect to insurance, repairs, alterations, payment of taxes and assessments, default reserves, delinquency charges, default remedies, acceleration of maturity, secondary liens, and other matters the authority prescribes; and (7) may be made only if the participation in the loan to be purchased is secured as to repayment by a mortgage or other security instrument in the manner the authority determines is feasible to assure timely repayment under a loan agreement HCS CSSB 106(FIN) -34- 1 entered into with the borrower. 2 * Sec. 25. AS 44.88.155(g) is amended to read: 3 (g) Notwithstanding any other provision of this section, the authority may 4 waive or modify the requirements of this section as it considers appropriate and 5 prudent in order to finance a project if the authority intends to own the project or in 6 order to finance a power transmission intertie project. 7 * Sec. 26. AS 44.88.900(10) is amended to read: 8 (10) “project” means 9 (A) a plant or facility used or intended for use in connection 10 with making, processing, preparing, transporting, or producing in any manner, ll goods, products, or substances of any kind or nature or in connection with 12 developing or utilizing a natural resource, or extracting, smelting, transporting, 13 converting, assembling, or producing in any manner, minerals, raw materials, 14 chemicals, compounds, alloys, fibers, commodities and materials, products, or 15 substances of any kind or nature; 16 (B) a plant or facility used or intended for use in connection 17 with a business enterprise; 18 (C) commercial activity by a small enterprise; 19 (D) a plant or facility demonstrating technological advances of 20 new methods and procedures and prototype commercial applications for the 21 exploration, development, production, transportation, conversion, and use of 22 energy resources; 23 (E) infrastructure for a new tourism destination facility or for 24 the expansion of a tourism destination facility; 25 (F)__a_plant_or_ facility, other_than_a_plant_or facility 26 t fe t ission 27 development, transportation, conversion, 0 vk 238 * Sec. 27. AS 39.50.200(b)(46) and AS 44.83.045 are repealed. 29 * Sec. 28. AS 39.50.200(b)(46); AS 44.83.010, 44.83.105, 44.83. 162, 44.83.163, 44.83. 164, x» 44.83.165, 44.83.170, 44.83.177, 44.83.179, 44.83.181, 44.83.183, 44.83.185, 44.83.187, 31 44.83.189, 44.83.300, 44.83.310, 44.83.320, 44.83.325, 44.83.330, 44.83.340, 44.83.350, -35- HCS CSSB 106(FLN) wo ment AwnW & BY we = SFSSRBNRERRBOKRRESSERUARASETORES Chapter 18 44.83.360, 44.83.361, 44.83.363, 44.83.370, 44.83.380, 44.83.384(b), 44.83.384(c), 44.83.390, 44.83.392, 44.83.400, 44.83.410, 44.83.500, 44.83.510(b), 44.83.520, 44.83.600, 44.83.605. 44.83.610, 44.83.615, 44.83.620, 44.83.625, 44.83.630, 44.83.650, 44.83.990(8), and 44.83.990(9) are repealed. * Sec. 29. The Alaska Industrial Development and Export Authority may issue bonds to finance the acquisition, design, and construction of a power transmission intertie of at least 138 kilovolts between Healy and Fairbanks and owned, for the benefit of all of the utilities participating in the intertie, by Golden Valley Electric Association, Inc. The principal amount of the bonds may not exceed $60,000,000. * Sec. 30. The Alaska Industrial Development and Export Authority may issue bonds to finance the acquisition, design, and construction of a power transmission intertie of at least 138 kilovolts between Anchorage and the Kenai Peninsula to be owned, for the benefit of all of the utilities participating in the interties, by Chugach Electric Association, Inc. The principal amount of the bonds may not exceed $60,000,000. * Sec. 31. The Alaska Industrial Development and Export Authority may issue bonds to finance the acquisition, design, and construction of a power transmission intertie of at least 115 kilovolts between the Swan Lake and Tyee Lake hydroelectric projects and owned, for the benefit of all of the utilities participating in the intertie, by Ketchikan Public Utilities. The principal amount of the bonds may not exceed $40,000,000. * Sec. 32. The Alaska Industrial Development and Export Authority may issue bonds to finance the acquisition, design, and construction of a power transmission intertie of at least 138 kilovolts between Sutton and Giennallen and owned, for the benefit of all of the utilities participating in the intertie, by Copper Valley Electric Association. The principal amount of the bonds may not exceed $25,000,000. * Sec. 33. APPLICABILITY. The repeal of statutes by sec. 28 of this Act does not affect existing bonds or actions that have been taken under the repealed provisions. * Sec. 34. TRANSITION. Ail litigation, hearings, investigations, and other proceedings pending under a law amended or repealed by this Act, or in connection with functions transferred by this Act, continue in effect and may be continued and completed by the Alaska Energy Authority or the Department of Community and Regional Affairs, as appropriate, notwithstanding a transfer or amendment or repeal provided for in this Act. Certificates, HCS CSSB 106(FIN) -36- eo eN Dn & |S we = w Nw NM hh nw Nn NY ty —_ psi o Seis Ronn i sxdl Gaile ile iesiiive iitce ill sill excell aches tei Chapter 18 orders, and regulations issued or adopted under authority of a law amended or repealed by this Act remain in effect for the term issued, or until revoked, vacated, or otherwise modified under the provisions of this Act. All contacts, rights, liabilities, bonds, notes, or other obligations created by or under a law amended or repealed by this Act, and in effect on the effective date of this Act remain in effect notwithstanding this Act’s taking effect. The Department of Community and Regional Affairs shall assume, for those programs and projects transferred to it, the licenses, contracts, rights, liabilities, notes, or other obligations of the former Alaska Energy Authority with the same limitations and provisions as under a license, contract, might, liability, note, or other obligation of the former Alaska Energy Authority. Real property, records, equipment, and other property of the Alaska Energy Authority related to the programs and projects transferred to the department shall be transferred to the Department of Community and Regional Affairs. * Sec. 3§. TRANSITIONAL PROVISION CONCERNING EMPLOYEES OF THE ALASKA ENERGY AUTHORITY. When the Department of Community and Regional Affairs determines that continued employment of certain employees of the Alaska Energy Authority is necessary to continue uninterrupted service to programs, facilities, and power projects formerly owned by the Alaska Energy Authority that have been transferred to the department under this Act, the department may continue the employment of those employees. * Sec. 36. INITIAL TERMS OF LOAN COMMITTEE. Notwithstanding AS 42.45.060(b), enacted by sec. 5 of this Act, the initial terms of two of the public members of the loan committee established under AS 42.45.060 shall be for two years. The remaining two public members shall serve four-year terms as provided in AS 42.45.060. * Sec. 37. CONTRACTS WITH PRIVATE SECTOR. The Alaska Energy Authority shall, to the maximum extent feasible, enter into contracts with public utilities and other entities to Carry out its duties with respect to the maintenance and operation of power projects owned by the Alaska Energy Authority. * Sec. 38. ORDERLY TRANSFER OF FUNCTIONS. (a) Notwithstanding the effective date of this Act, the governor, the Department of Community and Regional Affairs, the Alaska Energy Authority, and the office of management and budget shall implement this Act in an orderly fashion. The transfer of rural programs operated by the Alaska Energy Authority to the Department of Community and Regional Affairs must be completed no later than -37- HCS CSSB 106(FIN) wo eran ke B&B we = Chapter 18 December 31, 1993. Until a program is transferred under this section, the Alaska Energy Authority may continue to administer that program under the former provisions of AS 44.83, notwithstanding the repeal of provisions of AS 44.83 in sec. 28 of this Act. (b) The Alaska Energy Authority shall assist the members of the Alaska Industrial Development and Export Authority to prepare for the powers and duties granted to them under this Act * Sec. 39. In accordance with AS 01.10.030, if a provision of this Act, or the application of a provision of this Act to a person or circumstance, is held invalid, the remainder of this Act and the application to other persons or circumstances shall not be affected thereby. HCS CSSB 106(FIN) -38- LAWS OF ALASKA 1993 Lo AN ACT Making appropriations for grants and loans for hydroelectric projects including power transmission interties, to capitalize certain funds for energy grant and loan programs in the state, including the power cost equalization and rural electric capitalization fund, to the Department of Community and Regional Affairs for operating costs related to power projects and programs and to capitalize the Railbelt energy fund. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: THE ACT FOLLOWS ON PAGE 1 Approved by the Governor: May 13, 1993 Actual Effective Date: August 11, 1993 10 ll 12 Chapter 19 AN ACT Making appropriations for grants and loans for hydroelectric projects including power transmission interties, to capitalize certain funds for energy grant and loan programs in the state, including the power cost equalization and rural electric capitalization fund, to the Department of Community and Regional Affairs for operating costs related to power projects and programs and to capitalize the Railbelt energy fund. * Section 1. (a) Subject to the conditions set out in (b) and (c) of this section, the sum of $43,200,000 is appropriated from the Railbelt intertie reserve (sec. 159, ch. 208, SLA 1990) to the Department of Administration for payments as a grant under AS 37.05.316 to Golden Valley Electric Association for the benefit of all the utilities participating in the intertie for design and construction of a power transmission intertie of at least 138 kilovolts between Healy and Fairbanks. ; wo moar aun se &6 wR = nv by SENG 3 ee ee eee eee Chapter 19 (b) The appropriation made by (a) of this section is contingent upon the execution of a written agreement between the electric utilities participating in the Healy-Fairbanks power transmission intertie, the Department of Administration, and the Alaska Industrial Development and Export Authority that provides that the participating utility or utilities agree to (1) pay the design and construction costs for the Healy-Fairbanks power transmission intertie that exceed $43,200,000; (2) pay the operation and maintenance costs of the Healy-Fairbanks power transmission intertie; and (3) allocate, in proportion to the system peak demands of the utilities participating in the intertie, less a 1.5 mill per kilowatt hour charge for all energy assessed to the line paid by the receiving utility, (A) the costs of construction that exceed the amount of the grant under this section; (B) the operation and maintenance costs; and (C) the costs that may reasonably be charged for services provided, including transmission to the intertie. (c) The appropriation made by (a) of this section is contingent upon the execution of a written agreement between the electric utilities participating in the intertie and the department in which Golden Valley Electric Association agrees to provide the other participating utilities access to the intertie for the purpose of assured access to resources, economy energy transactions, and other similar uses. * Sec. 2. (a) Subject to the conditions set out in (b) and (c) of this section, the sum of $46,800,000 is appropriated from the Railbelt intertie reserve (sec. 159, ch. 208, SLA 1990) to the Department of Administration for payment as a grant under AS 37.05.316 to Chugach Electric Association for the benefit of all the utilities participating in the intertie for design and construction of a power transmission intertie of at least 138 kilovolts between Anchorage and the Kenai Peninsula. (b) The appropriation made by (a) of this section is contingent upon the execution of a written agreement between the electric utilities participating in the Anchorage-Kenai Peninsula power transmission intertie, the Department of Administration, and the Alaska HCS CSSB 126(FIN) -2- a» a omy — we mernraunkh Be = Bem -m- OC CO RON Au & WN = SS he BB Chapter 19 Industrial Development and Export Authority that provides that the participating utility or utilities agree to (1) pay the design and construction costs for the Anchorage-Kenai Peninsula power transmission intertie that exceed $46,800,000; (2) pay the operation and maintenance costs of the Anchorage-Kenai Peninsula power transmission intertie; and (3) allocate, in proportion to the system peak demands of the utilities participating in the intertie less a 1.5 mill per kilowatt hour charge for all energy generated by the Bradley Lake hydroelectric project purchased by the receiving utlity, (A) the costs of construction that exceed the amount of the grant under this section; (B) the operation and maintenance costs; and (C) the costs that may reasonably be charged for services provided, including transmission to the intertie. (c) The appropriation made by (a) of this section is contingent upon the execution of a written agreement between the electric utilities participating in the intertie and the department in which Chugach Electric Association agrees to provide the other participating utilities access to the intertie for the purpose of assured access to resources, economy energy transactions, and other similar uses. * Sec. 3. The balance in the Railbelt intertie reserve, after the appropriations made by secs. 1 and 2 of this Act are paid, is appropriated to the Railbelt energy fund (AS 37.05.520). * Sec. 4. (a) Subject to the conditions set out in (b) - (d) of this section, the sum of $35,000,000 is appropriated from the Railbelt energy fund (AS 37.05.520) for deposit in the power project fund (AS 42.45.010) for payment as a loan under AS 42.45.010 to the participating utilities for the design and construction of a power transmission intertie of at least 138 kilovolts between Sutton and Glennallen. (b) Notwithstanding AS 42.45.010(g), repayments of principal and interest on the loan for which an appropriation is made under (a) of this section are appropriated to the Railbelt energy fund (AS 37.05.520). (c) The appropriation made by (a) of this section is contingent on the participating utility or utilities and the Department of Community and Regional Affairs entering into an -3- HCS CSSB 126(FIN) wo ern aunek |S NR = NR YD =m SSO PN AAR & YBN eS S&S RBNURERRSR 29 31 Chapter 19 agreement for a loan at zero interest for a term of 50 years. (d) The appropriation made by (a) of this section is contingent upon the completion of a feasibility study and finance plan satisfactory to the Department of Community and Regional Affairs as set out in former AS 44.83.181. (e) In this section, “participating utilities" means the utility or utilities participating in the design, construction, operation, and maintenance of the power transmission intertie between Sutton and Glennallen. * Sec. 5. (a) Subject to the conditions set out in (b) and (c) of this section, the sum of $20,000,000 is appropriated from the Railbelt energy fund (AS 37.05.520) for deposit in the power project fund (AS 42.45.010) for payment as a loan under AS 42.45.010 to the participating utilities for design and construction of a power transmission intertie of at least 115 kilovolts between the Swan Lake and Tyee Lake hydroelectric projects. (b) Notwithstanding AS 42.45.010(g), repayments of principal and interest on the loan for which an appropriation is made under (a) of this section are appropriated to the Railbelt energy fund (AS 37.05.520). (c) The appropriation made by (a) of this section is contingent on the participating utility or utilities and the Department of Community and Regional Affairs entering into an agreement for a loan at three percent interest for a term of 15 years. (d) In this section, “participating utilities” mean the utilities participating in the design, construction, operation, and maintenance of the power transmission intertie between the Swan Lake and Tyee Lake hydroelectric projects. * Sec. 6. The sum of $3,900,000 is appropriated from the general fund to the Department of Community and Regional Affairs for operating costs for carrying out its powers and duties under AS 42.45 and AS 44.47.050(19) and (20). * Sec. 7. The unexpended and unobligated balances of the following appropriations are repealed and reappropriated to the Railbelt energy fund (AS 37.05.520): (1) that portion of the appropriation made by sec. 25, ch. 80, SLA 1979, page 66, line 38, as amended by sec. 448(a), ch. 105, SLA 1985, and sec. 275(a), ch. 130, SLA 1986, that is allocated by sec. 25, ch. 80, SLA 1979, page 67, line 5 (Bradley Lake hydro project - $80,000); (2) that portion of the appropriation made by sec. 1(a), ch. 90, SLA 1981, as HCS CSSB 126(FIN) -4- Corn nan kek Be = Nn Ne NRO let — RPesSeexnrianwBEaonvrees hbo 88 29 31 Chapter 19 amended by sec. 69, ch. 92, SLA 1981, and sec. 236, ch. 141, SLA 1982, that is allocated by sec. 1(a)(1), ch. 90, SLA 1981, as amended by sec. 69, ch. 92, SLA 1981 (Bradley Lake - $5,000,000); (3) that portion of the appropriation made by sec. 1(b), ch. 90, SLA 1981, as amended by sec. 69, ch. 92, SLA 1981, and sec. 236, ch. 141, SLA 1982, that is allocated by sec. 1(b)(1), ch. 90, SLA 1981, as amended by sec. 69, ch. 92, SLA 1981 (Bradley Lake - $10,000,000); (4) sec. 241, ch. 141, SLA 1982 (Bradley Lake hydroelectric project - $3,000,000); (5) AS 44.83.420, repealed by sec. 318, ch. 171, SLA 1984 (Bradley Lake hydroelectric project); (6) sec. 5, ch. 41, SLA 1986 (Bradley Lake hydroelectric project - $50,000,000); (7) sec. 3, ch. 128, SLA 1986, page 8, line 7, as amended by sec. 1, ch. 96, SLA 1987 (Alaska Power Authority, Bradley Lake hydroelectric project - $50,000,000); (8) sec. 6, ch. 172, SLA 1988 (Bradley Lake power project - $7,000,000). * Sec. 8. (a) The sum of $13,200,000 is appropriated from the general fund to the Railbelt energy fund (AS 37.05.520). (b) The sum of $66,900,000 is appropriated from the general fund to the Railbelt energy fund (AS 37.05.520). (c) The sum of $66,900,000 is appropriated from the Railbelt energy fund (AS 37.05.520) to the power cost equalization and rural electric capitalization fund (AS 42.45.100) to capitalize the fund. * Sec. 9. The sum of $5,000,000 is appropriated from the general fund to the Department of Community and Regional Affairs for payment as a grant under AS 37.05.316 to the lliamna-New Halen-Nondalton Electric Cooperative for the design and construction of a 700 kilowatt hydroelectric power project on the Tazimina River and for the associated distribution system. * Sec. 10. The balances in the following funds on the effective date of this section are appropriated from the named former funds or accounts under the Alaska Energy Authority to the named funds established in the Department of Community and Regional Affairs to -5- HCS CSSB 126(FIN) eo en Aun & VY = Nn memphis SeSeaonaana se Gea Ss BYUMREREBEB Chapter 19 capitalize the funds: ALASKA ENERGY FUND OR ACCOUNT DEPARTMENTAL FUND Power cost equalization fund Power cost equalization and rural electric (AS 44.83.162) capitalization fund (AS 42.45.100) Power project fund (AS 44.83.170) Power project fund (AS 42.45.010) Rural electrification revolving Rural electrification revolving loan fund (AS 44.83.361) loan fund (AS 42.45.020) Power development revolving loan fund Four dam pool transfer fund (AS 44.83.500) (AS 42.45.050) Bulk fuel revolving loan fund Bulk fuel revolving loan fund (AS 44.83.600) (AS 42.45.250) * Sec. 11. The sum of $3,000,000 is appropriated from the general fund to the power project fund (AS 42.45.010) for payment as a loan to the City of Seward for completion of the electric transmission line from Seward to the Lawing substation. * Sec. 12. A sum equal to the amounts deposited in the Southeast energy fund (AS 42.45.040) beginning on the effective date of this Act and ending on June 30, 1994, is appropriated from the Southeast energy fund to the Department of Administration for payment as a grant under AS 37.05.316 to the Ketchikan Public Utilities for expenses related to the power transmission intertie between the Swan Lake and Tyee Lake hydroelectric projects. * Sec. 13. The sum of $126,600 is appropriated from federal receipts to the Department of Community and Regional Affairs for federally authorized energy programs and projects. * Sec. 14. A sum equal to the retained money held by the Alaska Energy Authority that is related to the authority’s rural programs is transferred and appropriated to the Department of Community and Regional Affairs for the purposes originally intended and for other energy- related purposes and projects. * Sec. 15. This Act takes effect only if the Eighteenth Alaska State Legislature enacts an Act that gives the Department of Community and Regional Affairs responsibility for rural power projects and programs. HCS CSSB 126(FIN) -6-