Railbelt Energy Fund: Letter to Governor Palin

NOTE: The following letter to Governor Sarah Palin is in response to questions posed about Railbelt Energy Fund appropriations approved by the Legislature.

June 4, 2007

The Honorable Sarah Palin
Office of the Governor
PO Box 110001
Juneau, AK 99811-0001

RE: Final Railbelt Energy Fund Appropriations

Dear Governor Palin:

After many years, MEA is happy to be working cooperatively with Homer Electric Association (HEA), Chugach Electric Association (CEA), Seward Electric System (SES), Municipal Light & Power (ML&P), and Cook Inlet Region, Inc., on the final appropriations of the Railbelt Energy Fund.

Thank you for the opportunity to share additional information regarding appropriations made to Matanuska Electric Association (MEA) from the Railbelt Energy Fund. The following information is in response to Director Rehfeld's letter dated May 25, 2007.

Question #1 - Description of the proposed project.

$14,000,000 Hold-Harmless Transmission Line:
The first grant for $14 million will help fund a 115 kilovolt (kV) transmission line to maintain and improve service to the Susitna Valley from Willow to Talkeetna. This appropriation holds MEA ratepayers "harmless" from a new line being built to allow conversion of the Susitna Valley portion of the existing Alaska Intertie to a bulk power transmission line through the MEA service territory. The conversion upgrade is intended to increase power transfers north to Fairbanks. Currently the Alaska Intertie transports power north and also serves as the key transmission line for development of the Susitna Valley (Willow north).

As an illustration, one can picture the existing line as a two-lane electric highway. With the change planned to the Alaska Intertie, the State will be converting the two-lane highway to a four-lane limited access highway. MEA is asking the State to fund a "frontage road" so that the new super-highway will not cut off affordable service or access to the people along the way. If MEA has to use the new bulk power 230kV transmission line in the future to serve its load centers, the cost to the people would be staggering and would place our operating employees at a greater safety risk.

In the 1980's the Legislature created the Railbelt Energy Fund, from which many subsequent appropriations have been made. For example, Golden Valley Electric Association (GVEA) will receive the benefit of $80 million in appropriations from the Fund. GVEA used previous Railbelt Energy Fund grant monies to build their own Northern Intertie, paralleling its existing line from Healy to Fairbanks.

MEA sought the Susitna Valley transmission line appropriation in 2002 and 2006. In 2002, it was approved by the Legislature but then vetoed by Governor Knowles (he singled out MEA for a veto). In 2006, the appropriation was again approved by the Legislature, but Governor Murkowski vetoed all Railbelt Energy Fund appropriations to the utilities. He then unsuccessfully attempted to reverse his veto in a subsequent special session.

The second grant of $12.5 million will be used to improve transmission infrastructure in the core area of the MEA service territory. This allocation will assist MEA with infrastructure development, providing funding for needed substation and transmission line projects. As you know, the Mat-Su/Eagle River areas are the fastest growing areas of the state. The MEA system is currently bulging and requires investment in infrastructure to help keep up with growth and to protect reliability.

Question #2 - What will the appropriation specifically buy?

The $14 million grant will allow MEA to extend its 115kV transmission system from Willow to Talkeetna, ensuring safe, reliable, and affordable power for the people of the Susitna Valley for many years to come.

MEA plans to use the $12.5 million grant to partially fund a new substation near the Mat-Su Regional Medical Center and to build transmission lines in the core service area of the Mat-Su/Eagle River region.

Questions #3 - Prior funding history of the project.

None of these appropriations are intended or needed to complete any previously funded state project for MEA.

MEA must build these critical projects. The people of the Mat-Su/Eagle River region have repeatedly tried to receive an equitable share of state grants for electric projects from the Railbelt Energy Fund. GVEA will receive the benefit of over $80 million from the Fund, and ML&P has received more than $19 million. However, the other Railbelt utilities (HEA, CEA, SES, and MEA) have not yet received an equitable share.

The projects and corresponding allocations funded by the 2007 Legislature are very similar to those also funded by the 2006 Legislature. Sadly, those 2006 appropriations were vetoed by then-Governor Murkowski. MEA is hopeful that under the Palin administration the citizens living in the Mat-Su/Eagle River region will finally receive a fair share of state support for critical electric infrastructure.

Question #4 - Future funding necessary to complete the project.

None. MEA members will pay for any funding necessary to complete the projects.

Question #5 - Estimate of the annual operating costs and source of operating funds.

No State funds. All annual and operating costs will be paid by MEA members and from those who purchase electricity from MEA.

Question #6 - What is the public purpose served by the project?

The purpose of this project is to provide the people of the Mat-Su/Eagle River region with backbone infrastructure required to continue safe, reliable electric utility service.

The State established the Railbelt Energy Fund to provide grants for the benefit of people living along the Railbelt. Over the years some regions have received many millions of dollars that they have used to build local infrastructure to offset the rates Alaskans in those regions had to pay.

The appropriations in SB53 will be used to build essential basic infrastructure such as transmission lines and substations that would otherwise be paid for through MEA member's electric bills. The Railbelt Energy Fund has yet to be appropriated to help build the basic infrastructure in the Mat-Su/Eagle River region, although the Interior and ML&P have previously received their share of the Fund.

Conclusion
Governor Palin, by approving the appropriations in the Railbelt Energy Fund, you will provide:

* Equality. These appropriations ensure equality among all Railbelt ratepayers. By your signature, these grants will save MEA ratepayers millions of dollars.

* Equity. The Railbelt Energy Fund appropriations in 2007 are designed to achieve equity for each utility. The final appropriation of the Fund will ensure that each Alaskan in the Railbelt receives a direct benefit from the Fund.

* Fairness. It is important to point out that the entire remaining balance appropriated in 2007 to MEA, CEA, ML&P, SES, and Copper Valley Electric Association is still substantially less than the benefit of grants already received by GVEA alone.

* Cooperation. Along with the united support of CEA, ML&P, HEA, SES, we believe that when the Fund is fairly distributed to these Alaskans in the Railbelt who have yet to receive a fair share, the utilities will be able to work more closely together on future issues.

Finally, we suggest that it is good public policy to distribute what remains of the Railbelt Energy Fund, which will "zero out" the fund so that the Legislature and Administration will not be faced with incessant lobbying for competing uses of these monies.

On behalf of its 52,000 customers, MEA respectfully requests you sign into law these critical
appropriations from the Railbelt Energy Fund, contained within the state capital budget bill, SB 53.

Sincerely,

Wayne D. Carmony