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Allure of the Railbelt Energy Fund.

Allure of the Railbelt Energy Fund

The Railbelt Energy Fund, originally established by Alaska legislators to support energy projects in the state's Railbelt - a corridor stretching from the Kenai Peninsula to Fairbanks - has proven to be a cookie jar in the state's leaner years. Many hands are reaching for the $230 million in funds.

Sen. Jan Faiks (R-Anchorage) proposed last year that the fund be repealed all together and the multi-million-dollar balance be transferred to the general fund. Among suggestions from other legislators are using the money for recreational or educational facilities, road construction, harbor and dock maintenance projects, stream rehabilitation, historical preservation and tourist-related projects.

In the 1989 legislative session, nearly 20 bills were submitted advocating use of the Railbelt Energy Fund. In this second session of the 16th Legislature, those bills remain alive and new fund-related bills have been introduced. Several lawmakers continue to argue that the fund's monies should be preserved for energy projects in the Railbelt.

In the mid-'70s, awash in oil revenues, the state began a program to develop energy sources for future demands in Alaska. One objective was harnessing the vast energy available through hydroelectric projects. In the 1980 and 1981 legislative sessions, nearly $1 billion was appropriated to 10 such projects.

Of this money, $124.7 million was allocated for a study of the proposed Susitna Hydroelectric Project. In subsequent legislative sessions, additional appropriations for construction of the project increased Susitnatagged monies to $300 million. But in 1985, the Alaska Power Authority, the agency responsible for hydroelectric project development, canceled plans for a Susitna plant because of financing problems.

To ensure money set aside for the Susitna project would be used for energy development in the Railbelt, legislators from the region sought to stash the funds for future use. They succeeded in establishing the $285 million Railbelt Energy Fund in 1986.

Presently, the electrical needs of communities along the Railbelt are served by a scattering of interconnected power plants. Supporters of plans to tie these sources together with new, more powerful and upgraded transmission lines say the present system is not strong enough to accommodate the growing electrical requirements of Alaska's Railbelt region.

When the fund was formed, the legislature created the Railbelt Energy Council to provide a new spending plan to meet the Railbelt region's future electrical demands. In 1987, the council suggested construction of electrical interties it judged would best supply those needs. It also concluded that completion of the Bradley Lake Hydroelectric Project was necessary to complete its Railbelt energy supply scenario.

The council proposed design and construction of 230 kilovolt transmission lines between Kenai and Anchorage and a full upgrade of the existing line between Anchorage and Fairbanks. The Kenai-Anchorage line currently has a 115 kv carrying capacity.

A bill advocating the Railbelt Energy Council's plan passed in the Senate, but was rejected by the House, which determined a feasibility study must first prove the project to be economically sound. After Decision Focus Inc., commissioned by the council to complete the study, found the 230 kv project was not cost effective, the plan was canceled.

Meanwhile, the energy fund has become more and more appealing as state capital spending dwindles due to decreasing oil revenues. Although portions of the Railbelt Energy Fund have been allocated for energy plans, such as for Bradley Lake and continued studies of electrical interties, for the most part the fund has remained intact. Not reported in the fund's total is more than $60 million in interest earnings accumulated over the past three fiscal years.

In 1989, the Alaska Legislature appropriated $35 million from the Railbelt Energy Fund to help to finance the Healy cogeneration project and winter sports training facilities. Those monies will not be approved for spending until certain contingency factors are met.

Undeterred by the failure of the 1987 Railbelt Energy Council proposal, the Railbelt electric utilities resumed efforts to obtain state financing for an intertie project. A new study initiated by the utilities, "Economic Feasibility of the Proposed 138 KV Transmission Lines in the Railbelt," was completed in December by Decision Focus. The utilities now propose spending the Railbelt Energy Fund on a new, scaled-down project they argue the study has shown to be cost effective.

The report analyzes three sections of the proposed 138 kilovolt intertie system: a new transmission line between Kenai and Anchorage (southern line), a new transmission line between Healy and Fairbanks (northern line), and a limited upgrade of the Anchorage-Fairbanks line.

The study's authors conclude that projected benefits for Railbelt electric consumers include lower cost energy as a result of displacement of the higher cost energy, shared electric capacity by two or more areas, increased system reliability due to reduced customer outages, reduced transmission losses, and shared use of operating reserves maintained to avoid customer outages. It is also noted that the intertie could lead to increased state revenues if gas was substituted for oil in the project's generators, resulting in increased gas royalty and severance tax income.

In the study, these total benefits are considered to be worth as much as $283 million. Cost of the intertie project - expected to total no more than $160 million - includes projected operating and maintenance expenses (in present value) for the entire life of the facilities.

The transmission line project is backed by the Alaska Rural Electric Cooperatives Association (ARECA), a group representing all electric coops in the state and nine electric utilities. Dave Hutchens, executive director of ARECA, is lobbying in Juneau for support and funding for construction of this version of the intertie system.

According to Hutchens, other projects, once on-line, would be worked into the intertie system for maximum energy capability. The Bradley Lake Hydroelectric Project, scheduled to be complete in 1991, would serve as a backup power source for the Railbelt. The completed Healy coal-fired cogeneration plant also could be linked to add power to the system. Additionally, ARECA supports construction of a section of intertie between Seward and Anchorage to replace a deteriorating line.

The number of versions of intertie proposals before the legislature muddies the waters of Railbelt fund debate. One competing proposal was submitted by Rep. Terry Martin (R-Anchorage) this session. It would allocate $280 million from the Railbelt Energy Fund to the Alaska Energy Authority (formerly the Alaska Power Authority) for design, construction and upgrade of transmission lines and interties.

Twin bills submitted by both the House and Senate Rules committees, requested by the governor, include 42 appropriations for everything from "promotion of the 1992 Alcan anniversary" to "a footbridge at Ship Creek Overlook Park."

Included in bills competing for Railbelt Energy Fund appropriations:

*The balance of the fund to be transferred to the general fund, with $180 million directed for use for municipal debt retirement and economic development, economic development of unincorporated communities, and volunteer fire departments;

*$45.6 million to the Alaska Department of Transportation and Public Facilities for planning, design and construction of a road from the Richardson Highway at Thompson Pass to connect with the rail lines at the Copper River;

*$7 million to the Alaska Energy Authority for a grant to Golden Valley Electric Association for extending electrical service in certain areas;

*$80 million to the Department of Administration for the Railbelt economic assistance and recovery fund;

*$224 million to the Alaska Energy Authority for certain electrical projects.

With so much competition waiting to dip into the cookie jar, legislators may be arguing for some time to come over how much of and if the Railbelt Energy Fund will be used for the region's energy development.
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Title Annotation:Alaska legislators propose new appropriations
Publication:Alaska Business Monthly
Date:Mar 1, 1990
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