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HomeMy WebLinkAboutRAPA news 1992ALASKA ENERGY AUTHORITY Power Cost Equalization Program Alaska Statutes 44.83.162 The goal of the Power Cost Equalization (PCE)Program is to provide economic assistance to customers in rural parts of Alaska.The per kilowatt-hour charge for electricity in rural Alaska can be three to five times higher than the per kilowatt hour charge in urban Alaska. The Alaska State Legislature appropriates funds to the Alaska Energy Authority's PCE program to reduce the cost of electricity in rural communities where diesel-fired generation produces more than 75%of the utility's total electrical consumption.A utility can apply for PCE if it has a residential consumption level of less than 7500 megawatt hours of eligible power.The application can be initiated by the utility or by a minimum of 25%of the customers of a utility. PCE funds are paid to utilities on behalf of approximately 24,000 eligible customers.The population served is estimated to be more than 68,000 throughout the 104 eligible utilities or the 174 participating communities (Attachment A). The Alaska Energy Authority (AEA)and the Alaska Public Utilities Commission (APUC) has shared responsibility in administering the PCE program.The Alaska Legislature has established functions for each agency by statue;AS 44.83.162-165 governs the APUC and AEA program responsibilities (Attachment B). A formula is used to determine PCE rates;95%of a utility's costs among 8.5 cents per kilowatt and 52.5 cents per kilowatt are used to calculate the PCE rate.All customers must pay at least 8.5 cents for every kilowatt hour eligible for PCE assistance.If costs are more than 52 cents per kilowatt,the maximum PCE rate is 41.8 cents (52.5 cents -8.5 cents =44 cents x 95%=41.8). UTILITY COSTS CostsNOT ___.Costs above ss covered by PCE :§2.5¢/nwh | |Costs between PCE pays 95%of the 8.5¢/kwh and r---verifiable and reasonable 52.5¢e/kwh costs in this bracket Costs NOT -_/Costs up to covered by PCE |8.5¢/nwh Program.doc -7/14/92 ”The PCE rate is determined by using only necessary and reasonable costs that can be verified by the APUC.The law requires the APUC to eliminate any duplicative or unnecessary costs from the PCE rate calculation. The PCE rate is calculated by using two different categories of expenses: -Fuel expenses:the cost of fuel,including transportation. -Non-fuel expenses:other costs such as salaries,insurance taxes,power plant parts and supplies,interest and other reasonable costs. 1During May 1992,the APUC resolved to pursue amendment of program regulations to raise the PCE floor to 9.5 cents or,possibly,other level necessary to match available program funding. Program.doc -7/14/92 o-Attachment A POWER COST EQUALIZATION (PCE)PROGRAM PARTICIPATING UTILITIES Akhiok.City of Akiachak Limited Akiak City Council Akutan,City of Alaska Power &Telephone: Craig Skagway Hydaburg Tok Alaska Village Electric Cooperative: AlJakanuk Noatak Ambler Noorvik Andreafsky Nulato Anvik Nunapitchuk Chevak Old Harbor Eek Pilot Station Elim Pitkas Point Emmonak Quinhagak Gambell Russian Mission Goodnews Bay Savoonga Grayling Scammon Bay Holy Cross Selawik Hooper Bay Shageluk Huslia Shaktoolik Kaltag Shishmaref Kasigluk Shungnak Kiana St.Mary's Kivalina St.Michael Koyuk Stebbins Lower Kaliskag Togiak Marshall Mekoryuk Toksook Bay Minto Tununak Mountain Village |Upper Kalskag New Stuyahok Wales Allakaket City Energy Systems (Allakaket,Alatna) Andreanof Electric Corporation (Atka) Aniak Light &Power Arctic Village Electric Company Atmautlauk Joint Utilities Bethel Utilities Corporation Bettles Light &Power Birch Creek Village Electric Brevig Mission Utility Buckland,City of Chignik Electric __. Chignik Lake Electric Utitity,Inc. Chitina Electric,Inc. Circle Electric Utility Coffman Cove Utilities Cordova Electric Cooperative Diomede Joint Utilities Eagle Power Company Egegik Light &Power Ekwok Electric,Inc. Elfia Cove Electric Utility False Pass Electric Association Far North Utilities (Central) G&K,Inc.(Cold Bay) Galena,City of Golovin Power Utility Gustavus Electric Co. Gwitchyaa Zhee Utility Company (Ft.Yukon) Haines Light &Power Company,Inc. Hughes Power &Light Igiugig Village Council I-N-N Electric Cooperative (lliamna,Newhalen,Nondaiton) Ipnatchiaq Electric (Deering) King Cove,City of Kipnuk Light Plant Kokhanok,Village of Koliganek Village Council Kotlik Electric Service Kotzebue Electric Association Koyukuk,City of Kuiggtuum Kalugvia (Kwethluk) Kwig Power Company (Kwigillingok) Larsen Bay Utility Company Levelock Electric Cooperative Manley Utility Corporation Manokotak Power Company McGrath Light &Power Middle Kuskokwim Electric Cooperative: Chauthbaluk Sleetmute Crooked Creek Stony River Red Devil Naknek Electric Association,Inc. (Naknek/King Salmon) Napakiak Ircinraq Power Company Napeskiak Inc. Naterkaq Light Plant (Chefornsk) Nelson Lagoon Electric Cooperative Nightmute Power Plant Nikolai Light &Power Nome Joint Utility System North Slope Borough: Anaktuvuk Pass Point Hope Atqasuk Point Lay Kaktovik Wainwright Nuiqsut Northway Power &Light,Inc. Nushagak Electric Cooperative (Dillingham,Aleknagik) Ouzinkie,City of Pedro Bay Village Council Pelican Utility Company Perryville,Village of Pilot Point Village Council Port Heiden,City of Puvurnag Power Company (Kongiganak) Rampart,Village of Ruby,City of Sand Point Electric Sheldon Point City Council St.George Municipal Electric Utility St.Paul Municipal Electric Utility Stevens Village Energy Systems Takotna Community Association Tanana Power Co. Tatitlek Electric Utility Telida Village Utility Teller Power Company Tenakee Springs Electric Tetlin Village Energy System Thorne Bay Public Utility Tlingit-Haida Regional Electrical Authority: Angoon Kassan Hoonah Klawock Kake Tuntutuliak Community Service Association Umnak Power Company (Nikolski) Unalakleet Valley Electric Cooperative Unalaska Electric Utility Unqusraq Power Co.(Newtok) White Mountain Utilities,City of Yakutat Power,Inc. The following wtilities did not participate in the PCE program during Fiscal Year 1990: Alutiiq Power Company (Karluk) Beaver Electric Chalkyitsik Energy Chenega Bay IRA Village CouncilClarksPoint,City ofKobukValleyElectric Tulukeak Traditional Power Utiility (Tulukssk) Venetie Village Council Power Cost Equalization (PCE)Program165ParticipatingCommunities T'yquawyseaqy Attachment B Alaska Energy Authority Eligible Utilities 104 Utilities 174 Communities Power Cost Equalization Program |}Alaska Public Utilities Commission 1.Determines utilities eligibility to participate in the PCE program. 2.Calculates PCE rates: -Determines resasonable eligible non-fuel costs. -Determines generation efficiency and line loss. 3.Participates in training workshops. Alaska Energy Authority .Determines eligibility of community facilities/meters (customers). .Issues payment to utility. .Caluclates refunds and adjustments. Training: -Holds workshops. -Production of training tapes/manual. Gathers and analyses statisical data. (publication of statistics) Attachment C ALASKA ENERGY AUTHORITY HISTORICAL PCE EXPENDITURES EXPRESSED IN 1985 DOLLARS AND FY 92 -FY93 ESTIMATED EXPENDITURES ExpendedinFiscalYearExpendedUSC.P.1.1985 $$$ 1985 11811.4 Jan-85 105.5 11811.4 1986 17785.4 Jan-86 109.6 17120.1 1987 16771.4 Jan-87 111.2 15911.7 1988 17018.7 Jan-88 115.7 1§518.3 1989 17104.6 Jan-89 121.1 14901.2 1990 17961.6 Jan-90 127.4 14874.0 1991 19698.5 Jan-91 134.6 15439.8 1992 15782.1 (estimated -80%program requirement) 1993 18026.7 (estimated -90%program requirement)co4vInMillionso--*--Expended Expended in 1985 $$$ 2 2 T 2 4 4 G .v g LJ LU 1986 1987 1988 1989 1990 1991 Fiscal Year 7/14/92 Attachment D Total Cost of Fuel Oil ($) $24.000.000 $23.000.000 i $22,000,000 F 1 2 $21,000,000 + $20,000,000 + $19,000,000 $13,000,000 1985 1986 1987 1968 Fiscal Year 1989 1990 KWH Sold per Gallon of fuel oil (kwh/gallon) 12 11S 11 10.5 10 95 1988 1986 1987 1988 1989 .1990 Fiscal Year Population Served '70,000 1990 135,000 Total PCE Eligible MWH (MWH) 130,000 125,000 120,000 115,000 110,000 105,000 100,000 95,000 90,000 1985 1986 1967 1988 1989 1990 Fiscal Year RAPA NEWS In This Issue Cover &Page 2 RAPA Annual Meeting Page 3 New Board Elected Booklets to Order Guest Speakers at Membership Meeting Page 4 Hickel Appoints Carter Hickel Proposes Restructuring AEA Page 5 Meet the Board Page 6 92-93 Board of Directors Page 7 &8 Garzini Comments on PCE to APUC Page 9-12 Summary of 1990 Clean Air Act AnchorageAlaska 99510-021.P.O.Box 100214 (907)345-5771|Coe RAPA Has Successful Annual Membership Meeting On October 14,1992,member utilities and their guests gathered at the Anchorage Hilton Hotel Ballroom to hear an excellent slate of speak- ers,and to conduct a board meeting,fuel cooperative meeting,elect officers for the coming year,and renew old friendships.The two day event began on Tuesday night with a board of directors'workshop to review and suggest changes in the association's bylaws."This respon- sibility should be part of our regular housekeeping duties to review our by-laws annually,and to encourage input from all the member utili- ties,”said Mr.Brooks Chandler,attorney for RAPA.The new draft will be mailed out individually to each member utility,and copies were available at the membership meeting.The new bylaws will be voted on next year at the 1993 annual membership meeting.The full day schedule on Wednesday,began with a very productive meeting of the RAPA sponsored Fuel Cooperative.Attending and participating in the meeting were representatives from around the state from utilities and fuel supply companies:Rick Blodgett,Teller Power Co.;Dianne Rabb,RAPA;Gary Kessing,MKEC;Pat Kilgore,CMS; Frank Mondrey,Alaska Lube and Fuel;Don Castle,Petro Marine Services;Nels Franklin,Manokotak Power;Jim Spencer,Tesoro Alaska Petroleum;Daryl Morris,Alaska Power &Telephone;Willie Kernak,Napakiak Power Co.;Sammy Jackson,Kokarmuit Corp; Willie Atti,Kwik Inc.;Gary Butcher,Nome Joint Utilities;Ben Frantz, North Slope Borough-Dept Maint Svcs;Paul Eller,Tanana Power Co. Much progress was made on establishing a good working relationship for the 1993 bid process.Improvements in the bid package will include smaller geographic groupings,a longer time frame between the release of the bid package and opening and award of bids,an absolute commitment by participants to remain with the cooperative in accept- ing bids,and a more active involvement in the process by all partici- pating fuel coop members.All the participants were looking forward to the 1993 fuel cooperative bid package and will be working together to foster continued growth and success for the program. Next on the agenda for the all day meeting was a gathering of the board members and their guests for a luncheon and board meeting. Highlights of the board of directors'meeting included a report from the executive director,Mrs.Linda Dianne Rabb.Mrs.Rabb gave an (continued on next page) RAPA Annual Meeting (cont.from page 1) update on the Clean Air Committee's work to draft new legislative language for consideration in Juneau.Alaska is required to implement the Federal Clean Air Act and it will affect all our rural utilities,as well as any company with emissions into the atmosphere including fuel companies,fish processors,mining and manufacturing companies, electric utilities,and others.As the proposed language stands,now, small utilities would pay for a certificate to allow them to operate for five years,and also a per ton emissions charge in the range of $3.19 to $6.45 per ton,based on actual emissions.The committee will meet four times during December,to prepare DRAFT Legislation for the legislature's review in January.A final Draft will be mailed out to all RAPA members and all other utilities may request one from the RAPA office in Anchorage.Several of our members have requested that an exemption be considered for all PCE eligible rural electric power plants,this is not in the language as drafted of the proposed legislation. The Clean Air Committee has added additional meeting dates to the schedule:December 7th and 8th,December 16th and 17th,and to be announced,at least one meeting after Christmas.Meetings are held at the Northern Lights Inn starting day one at 1:00 p.m.and day two at 10:00 a.m.Please attend if convenient to your schedule. Mr.William Frazier,President of the RAPA Board of Directors, appointed a committee to review regulations affecting rural electric utilities.Serving on the committee are Ben Frantz of North Slope Borough,Gary Butcher,Nome Joint Utilities,Bill Frazier,McGrath Power and Light,William Igkurak,Kwig Power Company,and Linda Dianne Rabb,Executive Director of RAPA.The committee was formed to make recommendations of ways to ease the regulatory reporting burden on our small utilities,many of which have under three employees.The proliferation of numerous regulations,which are in many cases duplications of existing reports,increases the paperwork burden on small rural utilities.Also,this undue paperwork burden increases the cost of electricity to those who can least afford it,and to the State of Alaska through additional PCE costs. As an agenda item during the board meeting,two items were discussed regarding Board of Directors Policy.(1)All RAPA mem- bers must be fully paid up on their dues for the calendar year no later than December 31,or they will be dropped from the roll as an active member.Credit will be given only for the actual quarters that have been paid,the dues will be prorated to reflect actual membership.This policy is to be in effect until new bylaws have been adopted.(2)RAPA will not become officially involved in any individual utility dispute with any regulatory agency,unless it concerns an issue that clearly affects all our member utilities.And only after direction from the Board of Directors has been given.These policies were discussed,an all present were in agreement that they should be adopted by the board. The Board accepted the resigna- tion of Butch Cooley of Galena Electric Utility.Ms.Kelly Mala- mute is interim manager there. The Board discussed the waste oil disposal problem that exist across the state,and the nominating com- mittee was prepared to suggest names of potential board mem- bers to replace those three mem- bers whose term on the Board of Directors expired this year.After a finance report,the meeting was adjourned. Please note that all RAPA board meetings are open to the member- ship,and we encourage you to attend whenever possible.We had many of our RAPA members attend this Board meeting and look forward to seeing each and every one participating in the Associa- tion with your ideas and sugges- tions. New Board Members Elected at Annual Meeting Members of RAPA convened to hear a review of the year's activities and accomplishments and to elect new board members to fill vacancies left by those board members who rotate off the board at the end of their terms.Mr.Ben Frantz of North Slope Borough was elected president, Mr.William Igkurak of Kwig Power was elected first vice president, and Mr.Rick Blodgett of Teller Power Company was elected second vice president.Mr.Don Eller of Tanana Power Company was elected treasurer,and Mr.Gary Kessinger of Middle Kuskokwim Electric Cooperative was appointed to fill a board seat left vacant by Mr. Cooley's resignation from Galena. Mr.Brooks Chandler,attorney for RAPA gave a short talk on the new board policy regarding past due dues,and presented new draft bylaws for the RAPA members to take back and consider for a vote in 1993 at the annual membership meeting. Mr.Ben Frantz addressed the group,pointing out that in some areas of the state,a waste oil disposal problem exists.Please make the RAPA office aware of any problems with waste oil disposal you have in your area.We will assist in any way possible by putting you in contact with the proper organizations who handle waste oil. Mrs.Diana Leonard spoke to the membership about various prob- lems they had been experiencing in Egegiak. Mr.Bill Frazier was thanked by the Board of Directors for serving as President of RAPA.Bill Frazier has worked tirelessly and with great dedication for all the rural electric power producers in the state,and we have been honored to have him serve as president.The Board authorized a momento be presented to Mr.Frazier,and to Mrs.Paula Eller,past treasurer,of a hand carved,scrimshaw,ivory letter opener. Words alone can not properly express the gratitude of our organization for both of these outstanding individuals.We look forward to their continued participation and involvement in the coming years as the Rural Alaska Power Association continues to work on common issues and to grow in service to our members. Guest Speakers at the Annual Membership Meeting Members and guests of the Rural Alaska Power Association en- joyed a stimulating afternoon with notable guest speakers including: U.S.Representative Don Young, U.S.Senator Frank Murkowski, Dave Hutchens,Executive Direc- tor of ARECA,Chairman Don Schroer of Alaska Public Utilities Commission,Gleen Reed,Assis- tance Commissioner of Commerce and Economic Development,Ron Garzini,Executive Director of Alaska Energy Authority,and Tom Chapple,Department of En- vironmental Conservation,Speak- ing on the Clean Air Act.|Ree* St Booklets to Order for Your Electric Power Customers Recommended by Alaska Housing Finance Corporation "Consumer Guide to Home Energy Savings”by Alex Wilson and John Morrill,published by American Council for an Energy-Efficient Economy,2140 Shattuck Avenue #202,Berkeley,CA 94704,available in bulk for $3.50 each,or individually for $6.95.Also available locally from Alaska Craftsman Home Program,PO Box 876130,Wasilla,AK 99687,907-373-2247."The Blue Clue Energy-Efficient Refrigerator and Freezer Directory”list of top 15%energy-efficient freezers and refrigerators by model and size;updated every six months;available free from Bonneville Power,call 503-230-3478 or 800-622-4520. "Sometimes the house that costs more,cost less.”Published by Chugach Electric Association 1992; multiple copies are available from Peter Poray at Chugach Electric while supply lasts. Page 4 Hickel Will Propose Restructuring Alaska Energy Authority For Energy Projects JUNEAU-Governor Walter J.Hickel will propose legislation in January to fund construction of Alaska's most-needed energy projects and at the same time set up an annuity that will ensure reasonable power costs for rural Alaska for the next 20 years. The package is being developed by the Alaska Energy Authority and the concept has received the unanimous endorsement of the AEA board of directors.It would combine the railbelt energy fund,the Bradley Lake surplus,annual debt service paid by the Four Dam Pool and up to an additional $20 million in state funding into an energy fund.That fund and its earnings would then be used to construct four intertie projects and provide an annuity of $17 million annually to assure reasonable power costs through power cost equalization or more efficient energy projects. "One of the biggest fears rural Alaskan have expressed to me is that power cost equalization will be cut off,and their cost of electricity will skyrocket,”Hickel said."This proposal will guarantee them that either that subsidy will continue for 20 years or will be replaced by more efficient energy,while at the same time putting the railbelt energy funds to the purpose they were intended.” Hickel said the projects the AEA would build,interties from Anchorage to Fairbanks,the Copper Valley and the Kenai Peninsula, as well as one linking Ketchikan,Wrangell and Petersburg,would be basic economic development projects."One of the best things the state can do to promote economic development is to provide this type of infrastructure that cannot be provided by the private sector,”he said. The 20 year PCE "annuity”would give state and local governments enough time to come up with rural power systems that can provide reasonably-priced power over the long term,according to Ron Garzini,executive director of the AEA.These systems could include small hydro,geothermal,coal-fired and gas-fired plants.Currently, 104 utilities across the state receive PCE. The new fund would combine the following for a total of $154.8 million:railbelt energy fund,$2.8 million;railbelt intertie reserve fund,$100 million;interest on railbelt intertie reserve fund,$21 million;Bradley Lake surplus,$11 million,additional state contribu- tion,up to $20 million. Hickel said the package would be presented to the new Legislature for its approval when it convenes in January. Hickel Appoints Carter to APUC Governor Walter J.Hickel has ap- pointed James E.Carter,Sr.to serve on the Alaska Public Utili- ties Commission. James E.Carter,Sr.,of Kenai has been appointed to a six-year term on the Alaska Public Utili- ties Commission toa seat reserved for a person with education or experience in business adminis- tration.Carter worked as a chief administrator for the Federal Avia- tion Administration for 32 years before retiring in 1978.He has also served as state commander of the Civil Air Patrol,and was in- ducted into the USAF Museum Hall of Honor as a result of his accomplishments in the CAP. Most recently,Carter has served as executive director of the Kenai - Peninsula Borough Economic Development District from 1988- 91.He also served as the first president of the Cook Inlet Re- gional Citizens Advisory Coun- cil.Carter replaces Don May of Anchorage,whose term expires October 31.Cater will be paid a salary of $72,468 per year. Meet the Board William Igkurak Education: Chemawa Indian High School,Oregon Automotive Technology,Anchorage Com- munity College Outboard Motors Corporation Service School,Tukwilla,WA Powerplant Generations,Seward,AK 88,'89 &'90 Deutz diesel Engine Service Schools Work History: Mckenzie Auto Service,Mechanic,Anchorage Calista Corporation,Management Counselling area villages,Bethel Alaska Army National Guard,Sr.Track &Misc.Vehicle Mechanic, Generator Operator &Mech.OMS Shops,Bethel Kwick Inforporated,Parts &Service Mgr.,Kwigillingok Bethel Power Products,Parts &Service Mgr.,Bethel Napakiak Marina,Parts &Service Mgr.,Napakiak Qemiralek Coast Corporation,Bookkeeper,Kongiganak 1982 Kwigillingok IRA Council,Bookkeeper 1983-1991 Kwig IRA Council,Kwig Power Company,General Mgr. Jan 1992 to present Kwig IRA Council,Tribal Utilities Director Military: 1972-1978 AK Army National Guard,Honorable Discharge Hobbies: Hunting,Fishing,Boating,Snow-machining and Basketball Associations: Qemirtalek Coast Corporation,Boardmember,Kongiganak 1989 to present RAPA Boardmember 1990 to present. RAPA EL Rural Alaska Power Association 1992-1993 Board of Directors Ben Frantz,President Pax:852-0341 Department of Municipal Services North Slope Borough,P.O.Box 69 Barrow,Alaska 99723 ph.852-0340 William Igkurak,lst V.P.Kwig Power Company Fax:588-8429 P.O.Box 30 Kwigillingok,Alaska 99622 ph.588-8626 Rick Blodgett,2nd V.P.Teller Power Company Fax:642-3451 P.O.Box 532 Teller,Alaska 99778 ph.642-3261 Don Eller,Treas. Fax:373-5599 Tanana Power Company P.O.Box 873809 Wasilla,Alaska 99778 ph.373-5585 Gary Butcher Fax:443-3028 Margaret DeMandel Fax:67574334 Richard Levitt Fax:697-2355 Robert Enoch Fax:256-2441 Nome Joint Utilities P.O.Box 70 Nome,Alaska 99762 ph.443-5288 Aniak Light and Power. P.O.Box 129 Aniak,Alaska 99557 ph.675-4334 Gustavus Electric Company P.O.Box 102 Gustavus,Alaska 99826 ph.697-2299 Tuntutuliak Community Services General Delivery Tuntutuliak,Alaska 99680 ph.256-2529 Gary Kessinger Middle Kuskokwim Electric Cooperative,Inc.. Fax:447-3231 P.O.Box 40 Red Devil,Alaska 99656 ph.447-3230 *************x ****.***** Linda Dianne Rabb Fax:345-5878 Executive Director,RAPA P.O.Box 100214 Anchorage,Alaska 99510 ph.345-5771 Brooks Chandler,Atty Hicks,Boyd,Chandler &Falconer Suite 200 825 West 8th Ave. Anchorage,Alaska 99501 ph.272-8401 Fax:274-3698 P.O.Box 100214 *Anchorage,Alaska 99510 ¢Phone (907)345-3771 ©Fax (907)345-5878 or a :. Pate its a0DNMQVElaBETO Alaska Energy Authority AP che Corporation July 22,1992 Mr.Don Schroer,Chairman Alaska Public Utilities Commission 1016 W.6th Avenue,Suite 400 Anchorage,Alaska 99501-1963 Re:Docket R-92-6 --Order No.1 Power Cost Equalization Program Dear Mr.Schroer: I appreciate the opportunity to comment on the proposed change in the Alaska Public UtilitiesCommission(APUC)regulations regarding the Power Cost Equalization (PCE)program,specifically 3AAC 52-640 (c)(4)establishing the basis for allocating appropriation shortfalls. APUC proposes to allocate future shortfalls relative to formula requirements by raising the PCEfloortotheextentnecessaryinagivenyearinsteadofallocatingtoeachutilityanequalpercentagereductioninthePCErate. The option of raising the PCE floor has been debated for a number of years,and was recentlyincludedamongasetofalternativesforreducingthePCEprogramcostinareporttotheLegislatureproducedbytheAlaskaEnergyAuthorityinresponsetolegislativeintentlanguage.The rationale behind this alternative was that average electrical consumer costs in Anchorage, Fairbanks,and Juneau have increased since the inception of the PCE program,and that a definedincreaseinthefloorcorrespondingtopresent-day consumer costs in these three communitiescouldbejustifiedinkeepingwiththebasicprogramphilosophyoutlinedinAS44.83.162(a). The Energy Authority's proposal and previous proposals for raising the PCE floor were intendedtoreducetheprogramcost.Although the regulatory change now proposed by APUC has theappearanceofconsistencywiththeseproposals,it does not reduce the program cost.Therefore,it cannot be viewed as a substitute for the earlier proposals.The proposed regulatory changewould,in effect,leave it to the Legislature and the Governor to set the PCE floor each year (at8.5 cents or above)as a consequence of the approved appropriation level --the lower theappropriationrelativetoformularequirements,the higher the implied floor.If APUC declines toadjusttheformulafloordirectlyasamatterofregulationandoptsinsteadtoleavesuchadjustmenttotheLegislatureandGovernor,then a direct adjustment of the statutory floor wouldbepreferabletoanannual"implied"adjustment based on appropriation levels simply as a matter of clarity. APUC's present regulations provide that funding shortfalls relative to formula requirements willbeapportionedbyapplyinganequalpercentagereductioninthePCErateforeachparticipatingutility.This is a common approach for allocating shortfalls in formula programs,and has not beenasubjectofparticularcontroversywithrespecttothePCEprograminthepast.We are notpersuadedthatthemethodbeingproposedbyAPUCforallocatingshortfallsismoreequitableoverallthantheexistingmethod. QO PO.Box 110809 Juneau,Alaska 99811-0809 (907)465-3575 f%PO.Box 190869 701 East TudorRoad Anchorage,Alaska 99519-0869 (907)561-7877 92Q3\IT3276(1)Page 1 of 2 Mr.Don Schroer,Chairman July 22,1992 Page 2 The effects of these two approaches can be compared with a simple example:the cities of AkhiokandCraig.Akhiok has a relatively high tariff and PCE rate,while Craig's rates are relatively low.Assume that a 20 percent funding shortfall can be apportioned either with a 20 percent reductioninallPCErates,or with an increase in the floor that results in a uniform reduction in PCE rates of approximately 2.8 cents per kwh.These effects are shown in the table below: FY90 FY90 FY90 PCE FY90 PCE Residential PCE PCE Rate Percent PCE Rate Percent Community Rate Rate Minus 20%Reduction |Minus2.8 Cents Reduction Akhiok 45.0 30.6 24.5 20%27.8 9% Craig 15.4 3.9 3.1 20%L.1 72% Clearly,consumers in the higher cost utility would benefit from the proposed method of allocatingashortfall,while consumers in the lower cost utility are better off under the existing system.There are arguments on both sides of this question.Perhaps it is more equitable for consumers inthelowercostutilitytobearahighershareoftheburdenoffundingshortfalls,simply becausetheymaybebetteroffwithrespecttoelectricityrates.On the other hand,consumers in Craigwouldbeassesseda72percentreductioninPCEbenefits,in the example shown above,due to a20percentshortfallinPCEprogramfunding.Further,relatively low PCE rates are not alwaysassociatedwithrelativelylowretailconsumerrates.These are the ingredients of a political argument. We do not conclude that the APUC proposal is less equitable than the existing method,but we donotseeanequityadvantageintheproposalthatwouldjustifythechange. With respect to public acceptance,we believe that the proposal will create controversy biggerthantheconcernsvoicedinregardtotheexistingmethodofallocatingproportionalcutswhichhasbeenusedandhasbeenaccepted.The new proposal does not address a problem,but mightcreateone.Further,the new proposal exceeds the legislative intent and acceptance of potential program amendments in SCS CSHB 573 (RLS),inclusive of increasing the statutory floor to 9.5 cents/kwh;unfortunately the bill did not pass in the final hours of the special 1992 legislativesession. The Alaska Energy Authority sees no public benefit in the proposed change in method forallocatingfutureshortfallsinprogramfunding,consequently,we oppose the proposed change inregulation. I remain available to further discuss with you this matter and potential approaches to contain PCEprogramcostswithminimumimpactontheresidentialcustomersoftheeligibleelectricalutilities. Sincerely, Ronald A.Garzini Interim Executive Director 92Q3\IT3276(2)Page 2 of 2 SUMMARY of the 1990 CLEAN AIR ACT Prepared September 16,1992 by Alaska Department of Environmental Conservation On November 15,1990,President Bush signed into law amendments to the federal Clean Air Act (Act).The revised law initiated sweeping changes in air quality management throughout the nation.The summary below will provide you with some basic information on this complex law. TITLE |-AIR POLLUTION PREVENTION AND CONTROL Section 109 of the Act provides for the establishment of National Ambient Air Quality Standards.Primary standards are designed to *...protect public health with an adequate margin of safety.”Secondary standards "...protect the public welfare from any known or anticipated adverse effects associated with the presence of such air pollutants in the ambient air."To date,National Ambient Air Quality Standards exist for ozone,carbon monoxide,nitrogen dioxide,sulfur dioxide,particulate matter,and lead. Section 110 of the Act requires states to submit a plan to EPA "...which provides for implementation,maintenance,and enforcement..."of the ambient air quality standards. This plan is often referred to as the State Implementation Plan (SIP).In Alaska,this information is contained in the State Air Quality Control Plan and the Alaska Air Quality Control Regulations. Section 111 of the Act provides for the establishment of Standards of Performance for New Stationary Sources (NSPS).These standards establish emission limitations for specific air pollution sources,or categories of sources,based upon the use of feasible technology.Each source category standard is updated every few years to reflect technological advances. Section 112 of the Act (Title Ill of the 1990 Amendments)provides for the establishment of National Emissions Standards for Hazardous Air Pollutants (NESHAPS).Prior to 1990, this provision of law regulated specific industrial processes which emitted any of eight hazardous air pollutants.As part of the 1990 Act,189 hazardous air pollutants were established by Congress.EPA is required to develop a list of categories of stationarysourcesthatemitthelistedpollutants.In developing this list,EPA must consider the quantity of pollution typically emitted and the potential danger to public health.The Act then requires EPA to establish maximum achievable control technology (MACT)emission or work practice standards for these selected source categories over a period of twelve years.EPA is also establishing "area source"categories which will be required to apply generally available control technology (GACT)to reduce emissions.The list of hazardous air pollutants may be revised by EPA.In addition,any person may petition EPA to modify the list of hazardous air pollutants. Section 113 of the Act gives EPA federal enforcement authority when the provisions of a permit or applicable implementation plan are violated and states fail to adequately initiate enforcement.EPA's authority varies depending upon the violations,but generally includes:issuing orders,assessing administrative penalties,and bringing civil or criminalaction. Part C of Title |maintains the previously established program for the Prevention of Significant Deterioration (PSO).This program is intended to prevent fong term degradation of air quality in regions where the air quality is currently good.This will be achieved through a permit program that requires new industry sources to install Best Available Control Technology (BACT)to reduce out of stack emissions and sets a "cap” on ground level pollution increases.A permit can not be issued to a project if it causes a violation of either the National Ambient Air Quality Standards or the air quality increment caps. Part D of Title |contains the requirements for implementation plans for regions not in attainment with the National AmbientAir Quality Standards.It sets the groundwork to help nonattainment regions reach attainment with the air quality standards.Part D also contains a requirement for the review of new or modified major stationary sources such as power plants and oil refineries.Both pre-construction permits and operating permits are required for major sources located within nonattainment areas.In Alaska,Anchorage and Fairbanks are nonattainment for carbon monoxide,with Eagle River and the Mendenhall Valley of Juneau being nonattainment for airborne particulate matter. TITLE Il -NATIONAL EMISSION STANDARDS ACT Part A -Motor Vehicle Emission Standards Section 202 of the Act provides for the establishment of emission standards for automobiles and light duty trucks.The standards become progressively more stringent with the newer model vehicles.In the future,Alaska will be affected by cold weather carbon monoxide standards for new vehicles.Tailpipe standards can only be set by the federal government (California excepted)and can potentially address other mobilesources,including airplanes and ships. Section 207 of the Act provides for the establishment of an Inspection and Maintenance (|&M)program in carbon monoxide nonattainment areas to assure proper maintenance of vehicular pollution control equipment.Automobiles,trucks,and vehicles up to 12,000 pounds laden weight in Anchorage and Fairbanks are subject to section 202 and are required to pass an emission inspection every year. Section 211 of the Act provides for the regulation of fuels.Reformulated fuel programs, such as oxygenated gasoline (Oxy-Fuels)and low sulfur diesel fuel,are intended to reduce tailpipe emissions through more complete combustion of the fuel (axy-fuel)or by reducing the contaminant pollutant in the fuel (sulfur).The Oxy-Fuels program currently being implemented in Anchorage and Fairbanks should bring these areas into attainment with the national and state ambient air quality standard for carbon monoxide. Part B provides for the establishment of aircraft emission standards and enforcement.Section 231 provides for:the analysis of the effect of aircraft emissions on air quality, "the technological feasibility of controlling such emissions';and it provides for the development of aircraft emission standards. Part C establishes clean fuel vehicle programs which encourages alternative fuels,such as propane or compressed natural gas,and flexible-fuel and duel-fuel vehicles. TITLE Ill -GENERAL Title Ill provides for the general administration of the Act,including Emergency Powers (section 303),Citizen Suits (section 304),Judicial Review (section 307),and Economic Impact Analysis and Assessment (sections 312 &317,respectively). TITLE IV -ACID DEPOSITION CONTROL Title IV establishes a program to reduce acid rain deposition.Emission of sulfur dioxide and oxides of nitrogen,mostly from large fossil fuel fired electric utilities,will be controlled Curing the implementation of a two phase emission reduction program.Title V does not apply to Alaska,Hawaii,Guam,or Samoa because of the physical distance of these states from the problem areas of New England,Eastern Canada and selected western mountain regions. TITLE V -PERMITS Sections 502,503,&504 of the Act provide for the establishment of uniform,nationwide air pollution permitting programs directed by the states.All major sources of air pollution will be required to obtain air permits under the new program. A major source is either:a facility which has the potential to emit 100 tons per year or more of a criteria air pollutant (sulfur dioxide,carbon monoxide,nitrogen oxides,lead, particulate matter or ozone via hydrocarbon emissions);a facility which has the potential to emit 10 tons per year or more of any hazardous air pollutant,or 25 tons per year or more of any combination of hazardous air pollutants;or a facility for which federal emissions standards exist under the New Source Performance Standards provision of the Act. States must develop an air pollution permitting program complying with the provisions of Title V,or risk loosing jurisdiction of their air quality resources.Alaska is currently in the process of developing an air quality statutory bill.New statutory authority is necessary before compliance with Title V can be achieved. Section 507 provides for the establishment of a Small Business Stationary Source Technical and Environmental Compliance Assistance Program.The small business assistance program (SBAP)is envisioned to take a pro-active role in helping small businesses understand and comply with the complex provisions of the Act. TITLE VI -STRATOSPHERIC OZONE PROTECTION Title VI provides the framework for reducing emissions of ozone depleting chemicals, such as refrigerants,consistent with the Montreal Protocol. Section 602 of the Act lists Class |and Class Il substances.Class |substances include many of the chiorofluorocarbons (CFC's),halons,carbon tetrachloride,and methyl chloroform.Class II substances include many of the hydrochlorofluorocarbons (HCFC's). Section 604 details the scheduled phase-out of production and consumption of Class | substances,while section 605 details the scheduled phase-out of production and consumption of Class Il substances.Section 608 prohibits any person from knowingly venting refrigerants to the atmosphere.It also mandates the regulation of servicing and disposal of refrigeration and air conditioning units.Section 609 provides for regulating the service of automotive air conditioners.Other portions of Title VI require regulation of nonessential uses of products containing Class |substances,and provide for the identification of alternatives to the use of ozone depleting substances. oh a=iruafa||1.mec'a lemt an :|B eet =ay eet ENiyear:oneii HNSGT RR ESATO Sy are il :i}a Kt iii Noor iy a a nih i uh ae---=nay=i2rtne===PETRO etrn inINC. a ne HAPPY HOLIDAYS To You And Yours from the RAPA staff RAPA News P.O.100214 Anchorage,AK 99510 ee RA PA NEWS-P.O.Box 100214 oe-"Anchorage,Alaska 99510-0214 (907)272-3058 Issue #5 Alaska Energy Authority Appoints New Executive Director , Ronald A.Garzini appointed Acting Executive Director of In this AEA,effective July 2,1992.Issue While a formal search is being un-he was charged with overseeing alldertakenforapermanentExecutiveextemaloperationsincludingtheserves CoverDirector,Mr.Garzini is the chief ex-of the Police Department,Fire Depart-AEA Appoints ActingecutiveofficeroftheEnergyAuthor-ment,Health and Social Services,Parks,Diity,a public corporation of the State of Port,Transit,Public Works etc.rectorAlaska,and is responsible for supervis-Mr.Garzini moved to Seward in ing and controlling all affairs of the 1982 to accept the position of SewardcorporationasdirectedbytheBoardofCityManager.In addition,he servedas |Page 2Directors.In an effort to help reduce electrical costs for residents of the State, the corporation finances,constructs and operates power projects,administers loan programs and provides technical assistance to Alaskan communities and utilities. Mr.Garzini was born in Ukiah,Cali- fornia in 1946.After attending San Jose Sate where he received a degree in Public Administration,he worked as a management intern for the NASA pro- gram.After his internship,he worked as a resource analyst in the Oftice of Advanced Research and Technology (OART)in NASA Headquarters in Washington D.C. In 1970,he moved to Fairbanks, Alaska where he held the position of Director of Administration with BLM. In 1974,he was appointed Statf Direc- tor of Fairbanks North Star Borough. He held this position during the build- ing of the Trans-Alaska Pipeline. In 1978,Mr.Garzini moved to An- chorage where he held the position of Director of Transportation for the Mu- nicipality of Anchorage,The follow- ing year he was appointed Chief of Operations for the Municipality where Utility Manager over the electric utility which served the eastern Kenai Penin- sula.As such he was a signatory on the Bradley Lake Hydroelectric power project. He retumed to Anchorage in 1988 as Municipal Manager.During his years in public administration in Anchorage he was instrumental in the develop- ment of Project 80's,the Mermill Field upgrade,the development of the People Mover transportation system,and nu- merous expansions at the Port of An- chorage.During his total of 5-1/2 years in Anchorage,he provided both admin- istrative support and direction to An- chorage Municipal utility systems. In January of 1992,Mr.Garzini was appointed assistant Commissioner of the Department of Commerce and Eco- nomic Development.In this post,he was responsible for the economic de- velopment division within the depart- ment as well as the intemational trade division,with administrative supervi- sion of the Alaska State Offices in Tokyo,Japan,Seoul,Korea and Tai- wan, Mr.Garzini and his family live in Anchorage -his wife Pamela teaches Don Schroer's Remarks to RAPA Joe Murphy Leaves Nome Page 3 Gary Smith's Speech Attachments Ltr from Rep MacLean to Gov Hickel re:PCE Your comments to APUC re:PCE Special Education at Sand Lake El- ementary School.They have three children ranging in ages 13 through 19. Mr.Garzini was elected President of the Alaska Municipal Managers Asso- ciation in 1978 and again in 1988.He is an active member of the Alaska- Korea Business Council,the District Export Council and enjoys golf,rac- quetball and reading historical novels. Page? Don Schroer's Remarks to the Rural Alaska Power Association Chairman Schroer gave a stimulating talk on the APUC,the agency that is responsible for regulating public utilities and pipeline carriers."We're always ready to hear your comments and suggestions on what kind of job you think we're doing”,said chairman Schroer.But remember what Franklin P.Jones said, "Honest criticism is hard to take,particularly from a relative,a friend,an acquaintance or a stranger.” We issue certificates of public conve- nience and necessity to utility service providers and pipeline carriers who are fit,willing and able to provide service. We approve the rates,terms and condi- tions of service to the public.I know it is of interestto you that we also do the calculations for power cost equaliza- tion program,which helps out to cover a portion of the bill for high-cost elec- trical service to almost 69,000 custom- -ers.[=I serve as Chairman of the Alaska Public Utilities Commission,a posi- tion to which I was appointed by Gov- emor Hickel and confirmed by the Leg- islature.The Commission consists of five members,each appointed by the Governor for a six-year term.We have a budget of $3.8 million and a staff of 35.I am proud of the work we do. The user fees bill,or HB 596 as it was know in the final version,passed the legislature on May 16,1992,the last day of the special session.I expect that the Govemor will sign the bill.Basically the user fee will be a percentage of the gross revenue of the regulated utility,like 0.5%paid to the Dept of Revenue on a quarterly basis.These charges will usually be passed through to customers in the form of a slightly higher bill-say,50 cents per $100 of utility bill. Through this action the Alaska Legislature converted the budget of the Alaska Public Utilities Commission from general funds to program receipts,effective July 1.Therefore,after that date the Commission operates with money generatedunderHB596ornotatall.As result the Commission must adopt regulations immediately after the bill becomes effective./ The power cost equalization program is under heavy budget pressure.The program was 20%short in its funding last fiscal year and this required a reduction in the assistance available to utility consumers who face the highest utility costsinthestate.The impact of this cut was uneven.It hit the consumers in the highest cost communities the hardest.Some customers faced increases in their effective rates of up to 70%. Once the legislature sets the appropriation level for the PCE program,the governor has the power to reduce or eliminate the funding through his line-item veto power.Even if he leaves the PCE program alone (and I certainly hope that he will),the Alaska Energy Authority estimates that the program will be $2 million short again this year.As I understand it there are two reasons for this. Last year the Alaska Legislature directed the Energy Authority to develop options for reducing the cost of the program to the state.AEA did this and the Legislative Finance Committees developed their PCE appropriation fig- ure assuming that the changes pro- posed in the AEA options report would be made. Unfortunately,the law making the required changes (eliminating federal and state offices from eligibility and raising the floor for the assistance form 8.5 cents per kilowatt-hour to 9.5 cents) did not pass the legislature.Our execu- tive director testified in support of the changes to two Senate committees,but (See Schroer's Remarks,Page 3) Best of Luck,Joe Joe Murphy,General Man- ager of Nome Joint Utilities will be leaving Nome effective Sep- tember |,1992 to pursue other: interest.Joe has been an asset to his community and will be greatly missedby all who know | him.Joe has been an excellent' board member of RAPA,serv- ing as first Vice President and contributing his time and ener- gies toward making rural Alaska power production more effi- cient. Joe,on behalf of the Rural Alaska Power Association Board of Directors and mem- bership we wish you success and happiness in your retire- ment.Your expertise,knowl- edge,friendship,leadership and guidance will be greatly missed at RAPA,in Nome and across. the state. Good Luck and God Bless -RAPANEWS Page3 Schroer's Remarks (cont) the bill never made it out of House Rules during the end-of-the-year logjam. The Commission has the authority to adjust the floor of the program,taking into account "the rate of change in fuel cost and power demand.”Nobody I have talked to can tell me what this means.The Commission has asked for clarification from the legislature and from the public,but none seems to have a clue.These factors must be considered,but according to our lawyers,others may be considered as well.Since the purpose of the program is to reduce the high cost of power to a level "at a cost close or equal to the mean of the cost per kilowatt-hour of Anchorage,Fairbanks and Juneau,”comparing overall cost of power between PCE-eligible and ineligible communities and changes in that relationship is important.Finally,we cannot ignore the level of funding for the program as a factor.If there isn't enough money to operate,there are only two ways to reduce the cost to balance the budget.Either you cut a percentage off the top,or you raise the floor. I believe that raising the floor is fairer,because it distributes the impact more broadly.It does not hit the highest-cost areas the hardest.A percentage reduction otf the top,such as the one required to balance the PCE budget last year,runs the serious risk of causing rate shock to the highest cost rural ratepayers. Last summer the Alaska Energy Authority told the Commission that the program had a shortfall in funding.Our regulations required us to cut an equal percentage across the board. Yesterday the Alaska Public Utilities Commission voted to publish from comment a proposal to amend the Commission's PCE regulations.If the proposed change is adopted,budget shortfalls certified by the AEA would cause the Commission to raise the floor under the minimum power costs cov- ered by the program. I expect that there will be extensive public comment on this proposed change,which I welcome.However,I intend to bring this change up for an up or down vote as soon as the law allows. Chairman Don Schroer concluded his presentation and responded to ques- tions and comments from the audience. RAPA appreciates Chairman Schroer taking time from his busy schedule to discuss the recent changes in the Power Cost Equalization Pro- gram and the user fee funding of regu- latory activities brought about by the passage of H.B.596. Gary Smith Speaks on Non-Traditional Efficiency Improvements for Rural Alaska Gary Smith outlined the need for efficiency improvements in rural Alaska citing increasing costs to consumers, utilities and the state,increasing envi- ronmental compliance efforts,decreas- ing state funds for capital improve- ments and for PCE and the need for increased local employment as key rea- sons to pursue non-traditional efficiency improvements. He enumerated several options avail- able to rural Alaska including non-oil fired generation systems,cost reduc- tion systems,additional revenue sys- tems and business improvements.The non-oil fired generation systems in- clude an array of potential energy sys- tems including:Kinetic Hydro,Wind Turbines,Wood Waste Fueled Plants, Coal Fueled Micro-plants,Coal Fueled diesels,Waste Oil Fueled Stirling En- gines,Local Natural Gas,Photovolta- ics,and Fuel Cells. Cost reduction systems,additional revenue sources and business improve- ments reviewed were as follows:Cost Reduction Systems,battery storage systems and continuously variable speed transmissions;Additional Rev- enue Sources,district heating systems and absorption freezer/ice production systems;and Business Improvements, regional utilities,cooperative fuel pur- chasing,and independent power pro- ducers.; Implementing the changes Mr.Smith called for:Direction,clear focus on problems,clear prioritization of prob-lems,and clear identification of solu- tions;Closer linkage to real economic development;state energy plan,long term solutions,and emphasis on eco- nomical solutions;Partnerships,with state agencies,federal agencies,re- sources Owners,utilities,residents,IPP developers and other governments;and Seed Money,leveraging a must. This is an ambitious overview and will take many years to fully imple- ment. oeinéka State LegislaturePUL:»bas Mike Navarre wot Pt 2 Eileen MacLean Co-Chair G Sus é Co-Chair (907)465-3706 "=(907)465-3722 INTERIM AOORESS34824KalitornskyBeachRa.P.O.Box 290 Soldotna,Alaska 99669 __.Barrow waska99723(907)262-7842 House of Representatives (9071 852.71 Committee on Finance P.O.Box V,Juneau,Alaska 99811 resents 95%funding of the pro but only if the aboveJune15,1992 rep °8 program,yu The Honorable Walter J.Hickel Govemor State of Alaska P.O.Box A Juneau,Alaska 99811-0101 Governor Hickel: Early last session we spoke about a number of changes that could be made to reduce the cost of the Power Cost Equal- ization Program.I suggested that State and Federal Offices be removed from PCE eligibility creating approximately $1.0 million savings annually.We also discussed "raising the floor”,i.e.the minimum rate that must be paid by all consumers.This floor has been set at 8.5 cents per kWh by statute since the initial year of the program and has been maintained at that level by the Alaska Public Utilities Commission (APUC).As you are aware,the purpose of the PCE program is to equalize the cost of power in rural areas to the average cost of power in our three major urban areas which is about 9.6 cents per kWh.This action could reduce PCE program costs an additional $1.3 million annually. The combined effect of these two actions would reduce the general fund requirement for this program by over 15%. Although I was hesitant to support his increase to rural residents,I felt that it would be tair if the program received your support for full funding in recognition of the reduction achieved. For FY 93 the House Finance Committee,Senate Finance Committee and the Conference Committee on the operating budget increased funding for PCE by almost $1.0 million dollars above the level provided in your budget.This in- crease level of funding,depending on usage and oil prices, mentioned savings were achieved over the entire fiscal year. Because these changes could not be made without a statutory change,the House Finance Committee passed legislation allowing them to take place with APUC's ap- proval.Unfortunately,this legislation died at the last mo- ment of session in the House Rules Committee. At my request,this legislation has been redrafted for submittal next session.It is my hope that this legislation _(attached)could be fast-tracked and that the changes could be effected early in 1993.While this action would only allow a portion of the savings to be realized due its approval half way through the fiscal year,the savings generated are still significant. You will note that my re-draft of this legislation specifi- cally excludes schools from being taken otf PCE along with state and federal offices/facilities.I feel,As many legislators do,that schools must continue to be PCE eligible.To remove rural schools,which are used as community facili- ties for a multitude of purposes form this subsidy would create a true hardship. It is my hope that you will approve the additional funding applied to the PCE program by the legislature.I pledge my support to work with the administration to find ways to keep the cost of this important program as low as possible. As always,I thank you for your time and consideration. Sincerely, Representative Eileen MacLean cc:Bush Caucus Members Shelby Stastny,Director OMB Chryl Frasca,Director Budget Review Lori Nottingham,Deputy Legislative Liaison Charlie Bussell,Alaska energy Authority APUC , If you would like to make your views known on the proposed change in the floor of PCE from 8.5 to 9.5,please send your comments for and against changes to: State of Alaska Alaska Public Utilities Commission 1016 W.6th Ave,Ste 400 Anchorage,AK 99501 (907)276-6222 In the Matter of the Consideration of Amendment to 3 AAC 52.640(c)(4)Regarding Necessary Adjustments to Power Cost Equalization Comments on Proposed Amendment to PCE Regulation rmeeepeiiabaiacene*Sateseeeeweeee(Associate Member of RAPA) The Credit Card For Alaska's Roads Wherever you travel on Alaska's state A fuser highway system,chances are you're near one of Tesoro's over 100 independentdealers.And that's a very good reason -sie tstoapplyforyourTesorocreditcardConte "No today,even if you have another puns oe company's card.f Osita Junction Mile 156 i Mile 147 Mile 160 Mile 104 a Glennaiien With our card,Tesoro's high =aa quality Gold Star Energy i products will always be available to you,ang Sant wherever you travel.fo ineAnd,besides being a Coven quick and easy Way @ =Tesoro's dealers aretogetyourGoldStarconvenientlylocatedEnergy,you'll have a record of every Tesoro throughout Alaska. purchase you make. Get your Tesoro credit card today.Just pick up an application at any Tesoro branded dealer or call us at (907) 561-5521.So when you travel Alaska's roads,you'll have Alaska's credit card. oe oa.GR ee *"€Baeaeefaeeeets.eeéDoeBeaaeeeene RAPA ST ---_ Rural Alaska Power Association MEMBERSHIP APPLICATION Thank you for your interest in the Rural Alaska Power Association. Please fill out the following information form and return it to our office at the address listed below.Your company will belistedintheRAPAdirectoryandyouwillbeplacedonourmailinglisttoreceiveallmemosandmaterialspertainingtoRAPA's manyactivitiesandseminarspresentedthroughouttheyear.Included in your membership is a subscription to RAPA's industry newsletter. Please include a list of your employees'names and addresses who should receive our publication. If you have questions or comments,please do not hesitate to contact our office.Thank you again for your interest in RAPA. WE LOOK FORWARD TO WELCOMING YOU AS A NEW MEMBER! ANNUAL DUES Yearly Gross KWH Sales Annual Payment OR Quarterly Billing Check One . O 100,000 or tess $500.00 $137.50 f}100,001 -200,000 $1,000.00 $275.00 {]/200,001 -300,000 $1,500.00 $400.00 {]300,001 and uP $2,000.00 $525.00 MEMBERSHIP INFORMATION: Company Name Address City State Zip Phone Number Fax Number Officers or Key Personnel (Please include title) Please list name and address of person to receive yearly dues invoices: Name Address : City State Zip P.O.Box 100214 *Anchorage,Alaska 99510 ¢(907)272-3058 ©Fax (907)274-4893 ee pe esor-z7z (£06) PTLO"OTSS6 WXEVTY 'ebezogsry OTTOOT KOE *O'd uoTyerossy Jamog ENSETY yemy VdVa RAPA News is a monthly publication of the Rural Alaska Power Association,Inc.,a non-profit trade association for rural Alaska electric power produc ers and associate members. Comments,news items and letter to the editor should be addressed to: Linda Dianne Rabb Executive Director Rural Alaska Power Associaon P.O.Box 100214 Anchorage,Alaska 99510 (907)272-3058 December 9,1992 To:Gloria Brent Herv , Dave D-C gaFrom:DickE.©;\U Attached for your consideration is an alternative draft of a letter responding to the PCE article in the Alaska Journal of Commerce. aii ' { December 10,1992 A)H _-Mr.Dave Sutton r iS : Publisher \)-Alaska Journal of Commerce P.O.Box 91419 - Anchorage,AK 99509 oS Subject:Power Cost Equalization Dear Mr.Sutton: I read with interest the commentary by Steven C.Levi on Power Cost Equalization (PCE)in the Alaska Journal of Commerce issue of December 7,1992,and would like to add some comments.PCE is the State program,administered by the Alaska Energy Authority and the Alaska Public Utilities Commission,that pays a portion of the electric bills in many rural Alaska towns and villages. Your headline leads off by saying that the PCE program "surges in cost."While it is true that PCE was much less expensive in its initial years,expenditures have actually been about flat for the last seven years,averaging $17.3 million per year. What does that buy?Residential rates for the Alaska Village Electric Cooperative serving 48 rural villages is a good example.Without PCE,residential rates would be about $.42 per kWh.With PCE,residential rates are about $.20 per kWh.This is still roughly twice the cost of electricity for consumers in Anchorage and Fairbanks. Most of the reason for the huge differential is the lack of scale economies in operating small,remote village systems. I certainly agree with the column that oil revenues have made PCEpossible,that wemustexpecttheimminentdeclineoftheserevenues,and that PCE may bé cuf asa result However,I also believe that PCE has becomea critical source of support for many fragile village economies and that sharp reduction or elimination of the program could lead to a collapse of these systems and great social turmoil.The column's reference to the end of "the days of cheap and plentiful energy"shows a lack of appreciation for the underlying reality and the program impact. The Energy Authority is now working on a proposal for consideration by the next legislature that would use energy assets and revenues,rather than State general funds,to fund PCE at roughly its present level for the next 20 years and also provide funding for construction of major intertie projects in the Railbelt and elsewhere in the state.During this period,we propose to help however possible in merging small utilities into larger ones and in encouraging electric system efficiencies. While the PCE program does reduce the natural incentive that utilities would have to_seek such efficiencies,the column is in error when it implies that only dieselgenerationcostsareeligibleforsubsidywhilealternativeenergycostsarenot.All oeaol1AakOut valid electrical system costs are in fact eligible for PCE subsidy.The Energy Authority continues to encourage improved efficiency with strategies ranging from alternative energy to improved operator training to the establishment of standards for receipt of PCE. Sincerely,a a LCE Ronald A.Garzini Executive Director Alaska Energy Authority --- ret Hew December 6,1992 Rou B-e Dek Mr.Dave Sutton ¥Crore review /cCuero Publisher C4 of (Of ole ;UAwre Alaska Journal of Commerce Jour COturntul b 7 P.O.Box 91419 Thursday au,/Dee 10,92 Anchorage,Alaska 99509 Th bkRe Oe Subject:Power Cost Equalization Cm Dear Mr.Sutton: I have read with interest the article by Steven C.Levi in the Alaska Journal of Commerce issue of December 7,1992. I share many of the concerns expressed in the article in regard to the declining state revenue and its effect on the Power Cost Equalization (PCE).The Alaska Energy Authority is looking at solutions of the upcoming energy needs in urban and rural Alaska,in fact,we are preparing a strategic plan and a financial restructuring plan that will be presented to the Governor and the Legislature by the end of January 1993.With regard to rural electric utilities,the financial restructuring 20 year plan would create a limited annuity program to continue funding for PCE during a period of declining state revenues,this would provide essential support to rural village economies.Concurrently the plan would provide for continued funding of technical assistance 92Q4\TJ3970(1)Page 1 of 2 Letter to Mr.Dave Sutton Subject:Power Cost Equalization December 6,1992 for rural utilities,including energy conservation,to help prepare for the day when the Power Cost Equalization is no longer available. A major objective of the Energy Authority is to re-affirm and stimulate self-sufficiency of the utilities in rural Alaska,through technical training and development of their corporate strength. I am actively promoting the creation of regional utilities or utility clusters directed to result in technical and financial efficiencies;the initial results of these efforts will become soon visible. We see the problems,and we are challenging ourselves in a joint effort with the utilities to find reasonable solutions. In the meantime,the PCE program is carefully and efficiently managed to insure that the public money allocated to it is spent in full compliance with program requirements.The program has already experienced its fiscal reductions;it was cut by 20%and 10%respectively in FY92 and FY93.Legislation was proposed during SLA 1992,and will be again considered in the upcoming legislative session,to reduce program cost while maximizing PCE benefit to the eligible rural electrical residential customers.The legislation would:a)increase the PCE entry level from 8.5¢/Kwh to 9.5¢/Kwh;b)remove state and federal facilities and schools as eligible PCE customers. It is unfortunate that the article contains errors.The first of which is comparing the cost of the Power Cost Production Assistance (FY81)to the current PCE costs.Only 15 utilities participated to that program,while 96 utilities serving 160 communities participated to the PCE program in FY91.The overall population served by the PCE program has substantially increased because of the added participating utilities and because of an actual increase in population in rural Alaska,as confirmed by the 1990 U.S.Census. 92QA\TJ3970(2)Page 2 of 2 Letter to Mr.Dave Sutton Subject:Power Cost Equalization December 6,1992 Further,the article re-states the misconception that PCE deters utilities from making improvements to their system.While this could have been true at program inception the administrative regulation adopted in 1989 combined with a number of energy programs administered by my office have created an impetus in rural areas to meet electric utility industry standards.In reality PCE subsidizes less than half of the total electric power sold by the participating utilities and eligibility for PCE credit has become the incentive for rural electric utility to perform efficiently.Also,PCE rates are based on minimum efficiency standards, therefore utility costs due to lack of efficiency are borne by the utility customers and not by the PCE program.Ouzinkie citation as an example is incorrect:a mini-hydro plant was completed in 1988 at Ouzinkie by a developer,it has been fully functional since then and the community was able to acquire the project through state grants and small loan from the Energy Authority. With the hydro in place,cost of power and related PCE rates have dropped in Ouzinkie,and further reduction is expected in 1993 once all obligations to the developer will be satisfied. -__>Dawe D-¢ (Pacse vespoud To The chee joiuTed le TreadravewloryeamogeAfoelo"y 92Q4\TJ3970(3)Page 3 of 2 Letter to Mr.Dave Sutton Subject:Power Cost Equalization December 6,1992 I am looking forward to the Journal's continued interest in electrical energy matters statewide,as electricity is a basic infrastructure to economic development. Please feel free to call me or my office at 561-7877 if you have any questions. Sincerely, Ronald A.Garzini Executive Director GM:RAG'tl 92Q4\TJ3970(4)Page 4 of 2 Alaska Journal of Commerce By Steven C.Levi For the Journal of Commerce One of the greatest dilemmasfacingAlaska's Legislature in the coming decade will be what to doaboutPCE,Power Cost EqualizationCrudelystated,PCE is a finandalmechanismthroughwhichthestateofAlaskaoffsetsthepowerofcostitoBushresidents. This has not been an INEXPENSIVE PFOPOSi-prem tion.In 1989,it was estimated that the PCE program served 66,400 Alaskans.PCE currently serves 102 utilities in 170 com- munities.While the population serviced has not increased sub- stantially over the last decade,the cost of sub-sidizingBushrateshasgoneupsubstantially.The program began iin1981withapricetag ballooned to $18,5 million.PCE also creates other problerBecausethestateissubsidizingpo sources of power.In Ouzinkie,as.exam e,residents were buying pow to build a small hydroelectric plewhichwouldhavesuppliedelect ity atno more than $.22 per kwh.Bt hydroelectric project,it was not ec! nomic for the utility or its custome to consider the change.So the state continues to pay for inefficiency {cause with PCE its cheaper. As it is not economic to upgrade,many plants have not.Or they hayeeconomizedinotherareas.This has lead to disjointed electrical invento across Alaska which has made program difficult to monitor andi possible for the state to develop coprehensiveguidelines.In July of 198forinstance,the Office of the Govenorundertookanexaminationofrfgionalelectricalutilities.With regar to the inventory of plant,the stu revealed in the 18 villages included: the Village Power System Surve there are 47 generator sets.This it cludes nine different engine manu-factures and 35 models,nine differentgeneratormanufacturersand34dif- ferent models,and seven different voltage ranges for the distribution system.Such a diversity makes it hard for the utilities to exchange ex- pertise among themselves,not to mention impossible to share inven- tory. But there is more to PCE than the nuts-and-bolts of who pays for what and whether it is reason- able or not.The state of Alaska labors un- dera weight thatis asmuchphilosophicalas it is political or eco- nomic.Unlike anyotherstateinthe United States,Alaska is in a profit-taking position.Something like 90 percent of our revenue comes from a single industry.Fur- essence,an investment partner in that industry. Every day the pipeline pumps 1.6 million barrels into the supertankers in Valdez and every day the state receives ownership of 200,000 of those barrels (12.5 percent)... This,then,puts the Legislature in a odd bind.Since residents pay only nuisance taxes,it is not possible to reduce taxes because of additional income.Thus the state is distributing the oil in the form of higher levels of capital projects and social services to its residents.But this,in the long run,may be disastrous.Riches do notnecessarilymeanwealthjustashigh cash flow does not always mean high profits. As the PCE program has shown, the prudence with which subsidizedmoneyisspenthasalottodowiththesurvivaloftheprogram.Alaska's primary source of revenue,Prudhoe Bay,has peaked.Alaska will now see revenues falling at the rate of about 6 percent per year until the end of the century.This means that PCE,like every other Alaskan subsidy,will be forced to take an economic hit.What that will mean to Bush residents depends entirely on them.If costs cannot bereduced,many villages will find thatthedaysofcheapandplentifulenergyhavechangedtomonthsofcolder houses,larger utility bills and longer winters. Outer Continental Shelf study offeredBytheAlaskaJournalofCommercOmmiciatewiththafadaralMinat.@AmmAAS wanauall., Nondalton,Port Heiden and Togiak. Harvests of naturally occurring re- mee Bia 82.2.1 'ANDERSON TUG¢ "Barge With Th °Serving Pacific ©Speciali and Shi SEWARD,ALASKA ©PHONE:(907)224-! J.C."ANDY"'ANDERSC THE ALA ther,the state is,in . The Daily Long hauls.Heavy loads. Extreme temperatures.Rugged terrain.The dallygrindcantake its tollon your equipment.That's whyweoffera complete line of Chevron Oils and Greases. Oils and greases that fight . -INLET PETROLEUM CO. 459 West Bluff Rd.¢Anchorage,Alaska (907)274-3835 . Chevron,Chevron Desiqn are registered trad Specializing in oil fieconstruction,environm NATCHIQ, Family of Sub VRCA Environme (907)349- Alaska Petroleum (907)344- Houston Contracti (907)349- Arctic Slope Inspec (907)344-: Prudhoe Bay Comn (907)659-. corrosion inspq A WINN atSHey December 6,1992 N eh-c Dek Mr.Dave Sutton IYCrore revi ew Cuero Publisher Q4 oft op ole F UA rnd Alaska Journal of Commerce Jour COturstut b 7 P.O.Box 91419 Thursdoy O,uu,/Dee 10,92. Anchorage,Alaska 99509 Thouwk Soe Subject:Power Cost Equalization a. 12/3 Dear Mr.Sutton: I have read with interest the article by Steven C.Levi in the Alaska Journal of Commerce issue :,-JofDecember7,1992.in forte cide Ate Coremanrtary bendlene GreerCostEjea(i 20 tree Dire 5 Van Surges ch Cost )com trdicts Feafacts, I share many of the concerns expressed in the article in regard to the declining state revenue and its effect on the Power Cost Equalization (PCE).The Alaska Energy Authority is looking at solutions of the upcoming energy needs in urban and rural Alaska,in fact,we are preparing a strategic plan and a financial restructuring plan that will be presented to the Governor and the Legislature by the end of January 1993.With regard to rural electric utilities,the financial restructuring 20 year plan would create a limited annuity program to continue funding for PCE during a period of declining state revenues,this would provide essential support to rural village economies.Concurrently the plan would provide for continued funding of technical assistance 92QA\TI3970(1)Page |of 2 =Letter to Mr.Dave Sutton Subject:Power Cost Equalization December 6,1992 for rural utilities,including energy conservation,to help prepare for the day when the Power Cost Equalization is no longer available. A major objective of the Energy Authority is to re-affirm and stimulate self-sufficiency of the utilities in rural Alaska,through technical training and development of their corporate strength.Iam actively promoting the creation of regional utilities or utility clusters directed toresult ine technical and financial efficiencies;the initial results of these efforts will become soon visible. We see the problems,and we are challenging ourselves in a joint effort with the utilities to find reasonable solutions. In the meantime,the PCE program is carefully and efficiently managed to insure that the public money allocated to it is spent in full compliance with program requirements.The program has already experienced its fiscal reductions;it was cut by 20%and 10%respectively in FY92 and FY93.Legislation was proposed during SLA 1992,and will be again considered in the upcoming legislative session,to reduce program cost while maximizing PCE benefit to the eligible rural electrical residential customers.The legislation would:a)increase the PCE entry level from 8.5¢/Kwh to 9.5¢/Kwh;b)remove state and federal facilities and schools as eligible PCE customers. It is unfortunate that the article contains errors.The first of which is comparing the cost of the Power Cost Production Assistance (FY81)to the current PCE costs.Only 15 utilities participated to that program,while 96 utilities serving 160 communities participated to the PCE program in FY91.The overall population served by the PCE program has substantially increased because of the added participating utilities and because of an actual increase in population in rural Alaska,as confirmed by the 1990 U.S.Census. 92Q4\TI3970(2)Page 2 of 2 finn rove Letter to Mr.Dave Sutton Subject:Power Cost Equalization December 6,1992 Further,the article re-states the misconception that PCE deters utilities from making improvements to their system.While this could have been true at program inception the administrative regulation adopted in 1989,combined with a number of energy programs administered by my office,have created an impetus in rural areas to meet electric utility industry standards./In reality PCE subsidizes less than half of the total electric power sold by the participating utilities and eligibility for PCE credit has become the incentive for rural electric utility to perform efficiently.Also,PCE rates are based on minimum efficiency standards, therefore utility costs due to lack of efficiency are borne by the utility customers and not by the PCE program.Ouzinkie citation as an example is incorrect:a mini-hydro plant was completed in 1988 at Ouzinkie by a developer,it has been fully functional since then and the community was'able to acquire the project through state grants and-smal-toan-fronrthe-EntrgyAntiionty. With the hydro in place,cost of power and related PCE rates have dropped in Ouzinkie,and further reduction is expected in 1993 once all obligations to the developer will be satisfied. ->Dau D-c (Pease rwspoud ToT %dis jowTeal <LecPucadventoryQo¢A lorbo u ) PE oTe Tisties slow a Teoaly Nas ortuctesT af The nTDVaUes fener ouol im 1991 affrtioueres GU by 2,4 %r» 92Q4A\TIJ3970(3)Page 3 of 2 Letter to Mr.Dave Sutton Subject:Power Cost Equalization December 6,1992 I am looking forward to the Journal's continued interest in electrical energy matters statewide,as electricity is a basic infrastructure to economic development. Please feel free to call me or my office at 561-7877 if you have any questions. Sincerely, Ronald A.Garzini Executive Director GM:RAG:tl 92Q4\TJ3970(4)Page 4 of 2 --oC [20/9 2 Alaska Journal of Commerc Co entary }- Power cost equalization program surges in cost By Steven C.Levi For the Journal of Commerce One of the greatest dilemnjasfacingAlaska's Legislature in the coming decade will be what to 'ido about PCE,Power Cost Equalizatié Crudely stated,PCE is a finane mechanism through which the state of Alaska offsets the power of costo Bush residents. This has not been an inexpensive Proposi-yee tion.In 1989,it was estimated that the PCE program served 66,400 Alaskans.PCE currently serves 102 utilities in 170 com- munities.While the population serviced has not increased sub- stantially over the last decade,thecostofsub-sidizingBushrateshasgoneupsubstantially. The program began in - 1981 with a price tag of $2.5 million.In 1989,that cost ballooned to $18.5 million. PCE also creates other problenjs.Because the state is subsidizingpocostsintheBush,it is often not e nomic for local utilities to consid upgrading or switching to othp sources of power.In Ouzinkie,as: example,residents were buying powe for $.30 per kwh with the state cove ing 95 percent of the costs above cents.A private developer propos nomic for the utility or its customefs to consider the change.So the ste prehensive guidelines.In July of 198forinstance,the Office of the Gove nor undertook an examination of revealedin the 18 villages includedgtheVillagePowerSystemSurvethereare47generatorsets.This ix Outer Continental By the Alaska Journal of Comme a cludes nine different engine manu- factures and 35 models,nine different generator manufacturers and 34 dif- ferent models,and seven different voltage ranges for the distribution system.Such a diversity makes ithardfortheutilitiestoexchangeex- pertise among themselves,not to mention impossible to share inven- tory. But there is more to PCE than the nuts-and-bolts of who pays for what and whether it is reason- able or not.The state of Alaska labors un- dera weight that is as much philosophical as it is political or eco- nomic.Unlike anyotherstateinthe United States,Alaskaisinaprofit-taking position.Something like 90 percent of our revenue comes froma single industry.Fur- essence,an investment partner in that industry. Every day the pipeline pumps 1.6 million barrels into the supertankers in Valdez and every day the state receives ownership of200,000 of those barrels (12.5 percent).. This,then,puts the Legislature in a odd bind.Since residents pay only nuisance taxes,it is not possible to reduce taxes because of additional income.Thus the state is distributing the oil in the form of higher levels of capital projects and social services to its residents.But this,in the longrun,maybe disastrous.Riches do notnecessarilymeanwealthjustashigh cash flow does not always mean high profits. As the PCE program has shown, the prudence with which subsidizedmoneyisspenthasalottodowiththesurvivaloftheprogram.Alaska's primary source of revenue,Prudhoe Bay,has peaked.Alaska will now see revenues falling at the rate of about 6 percent per year until the end of the century.This means that PCE,like every other Alaskan subsidy,will be forced to take an economic hit.What that will mean to Bush residents depends entirely on them.If costs cannot bereduced,many villages will find that -the days of cheap and plentiful energyhavechangedtomonthsofcolder houses,larger utility bills and longer winters. elf study offered Nondalton,Port Heiden and Togiak. Harvests of naturally occurring re- 'ANDERSON TUG "Barge With T e Servin Pacific ©Specia and Si SEWARD,ALASKA ©PHONE:(907)224 J.C."ANDY"'ANDERS ther,the state is,in . grind can take its toll on your equipment.That's whyweOffera complete line Long hauls.Heavy loads. Extreme temperatures. Rugged terrain.The daily of Chevron Oils and Greases. Oils and greases that fight .INLET PETROLEUM CO. 459 West Bluff Rd.«Anchorage,Alask: (907)274-3835 . Chevron,Chevron Destqn are registered tr. NATCHIC Family of Su VRCA Environm (907)349 Alaska Petroleun (907)344 Houston Contract (907)349 Arctic Slope Inspe (907)344 Prudhoe Bay Com (907)659 Specializing in oil fie construction,environmet corrosion insect A WINNING