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potential rate impacts and there will be differing opinions on what the sale price should be. All parties recognize that Federal legislation authorizing the sale will be needed.

The transfer initiative would further the NEPP IV Objectives of ninimizing Pederal control of energy production. It would strengthen local capability to handle future power needs in

Alaska.

PY 87 BUDGET REQUEST

We are requesting new appropriations of $2,881,000 to continue our power operation, maintenance, and marketing programs. Our request also anticipates use of $400,000 deferred from PY 1985 balances for a total program of $3,281,000. This is the sane as the PY 1986 appropriation level.

The request contemplates $2,459,000 for normal, continuing

operations and maintenance functions, including $440,000 for

major replacement and maintenance items. This includes completion of the program to replace PCB transformers and continuation of the summer maintenance program on the Snettishan line. The balance of the request -- $822,000 -- covers all administrative and management costs for APA.

As mentioned earlier, we propose to continue net-billing arrangements for the operations contract and wheeling at Snettisham and to establish a net-billing arrangement for operations at Eklutna.

PY 1987 sales are estimated at 338 million kilovatt hours with revenues of $9,310,000. The revenues include a $737,000 increase due to the proposed modified repayment criteria.

Finally, we have emergency funds in the amount of $200,000 nade available in the FY 1984 Appropriations Act. Fortunately, we have not had to use any of these funds. Our request contemplates that these funds will remain available for use in PY 1987. We believe this remains an appropriate level of emergency funding for our programs.

I would be happy to answer questions and provide additional data to your committee as needed.

Thank you.

Biographical Notes -- Robert J. Cross

Mr. Cross was appointed Administrator of the Alaska Power Administration in June 1976. He has been on the Alaska Power Administration (APA) staff since the agency was formed in 1967. He was a staff engineer in the APA Planning Division between 1967 and 1973, and Planning Division Chief from 1973 to 1976.

Mr. Cross entered Federal Service in 1956 as a hydraulic engineer with the Bureau of Reclamation. Between 1956 and 1967, he had planning assignments with Reclamation in Colorado, Wyoming, Nebraska, and Alaska with a 2-year break for active service in the 0. . Army.

Mr. Cross is 52, and a native of Lincoln, Nebraska. Be attended public schools in the states of Nebraska, Washington, and New York, and is a Civil Engineering graduate from the University of Colorado. Cross has been a resident of Juneau, Alaska, since October 1964.

SALE OF ALASKA POWER ADMINISTRATION Chairman HATFIELD. Thank you.

Could you bring the committee up to date on the joint Federal-State study on the sale of the Federal hydroelectric facilities in the State of Alaska?

Mr. Cross. Yes, sir. We have worked rather intensely with the State and quite a few other affected people, customer groups and agencies involved in land management and so on, and we have completed a fairly thorough examination of the issues that we feel are important in the proposed transfer. It is that study and report that we expect to have available to furnish to the committee next month.

Chairman HATFIELD. In other words, you have not found any insurmountable problems that surround the sale, including, say, dropping oil prices, and Alaska is as interested as it once was? Or does that have any impact on this?

Mr. Cross. It certainly has an impact on getting the attention of the people in Alaska, because their priorities mean cutting back on other programs. Whatever the thought is, the project would be financed by revenue bonds. It would not require appropriation of government money in Alaska. If that were to be worked out in that fashion, the falling oil prices may not slow us down at all.

Mr. Chairman, I would add with regard to your earlier statement that the study has not found insurmountable obstacles, I know there will be a lot of difference in opinions on what the proper price should be.

Chairman HATFIELD. Mr. Cross, can you make any predictions or projection as to when this might be completed?

Mr. Cross. Mr. Chairman, I would offer two suggested timeframes. We would like to try to complete the work of obtaining a proposal within the guidelines that were discussed earlier and have it available for consideration by the Congress some time next year, with the thought that the sale might be completed by 1988 or 1989.

Chairman HATFIELD. Would that satisfy you over in the Department if we got that little sale?

Miss FITZPATRICK. Would it satisfy us, Mr. Chairman, or would we be happy about it? Mr. Chairman, we would be most happy to complete that sale, yes.

Chairman HATFIELD. Don't misread my support for this particular project.

Miss FITZPATRICK. I think we understand the chairman's position.

Chairman HATFIELD. Does the Senator from North Dakota have any questions for the Director of Alaska Power? Senator BURDICK. No, I don't

ADDITIONAL QUESTIONS FOR THE RECORD Chairman HATFIELD. Mr. Cross, we will have additional questions for your response.

(The questions and answers follow:]

QUESTIONS SUBMITTED BY CHAIRMAN HATFIELD

Alaska Power Administration (APA)

Question: Can you give the Committee an idea of what impact the falling oil prices will have on the budget of Alaska?

Answer: The impacts on the State of Alaska are severe. The Governor prepared in January a FY 1987 State budget of about $2.6 billion. Forecasts at the time projected a small revenue surplus between now and the end of FY 1987. The latest State forecasts show approximately $1 billion less revenues for this fifteen month period than had been projected in January. Substantial cut backs in State spending must be made.

Question: What is the total Federal investment in generation and related facilities for the Alaska Power Administration?

Answer: Our FY 1984 Financial Statements show a total Federal investment of $127 million.

Question: What would be the replacement cost of these facilities in 1986 dollars?

Answer: I would estimate the current replacement cost of our facilities at about $300 million in 1986 dollars. This is just a very rough estimate.

Question: Bring the Committee up-to-date on the joint Federal-State study of the sale of Federal hydroelectric facilities to the State of Alaska.

Answer: We have undertaken a joint study with the State on issues involved in the proposed sale. We expect to complete the study report and distribute it in April. The study received substantial input from affected agencies, the utilities who purchase power from us, as well as designated staff from the State legislature. We believe the study can provide an informative base to begin work on a specific sale proposal.

Question: Your statement indicates that the study has not turned up any insurmountable problems surrounding the sale. Briefly summarize the problems and the actions necessary to resolve those problems.

Answer: I would say that the questions on who should be the purchaser and what will be the sale price still have to be resolved. Considerable work remains concerning personal issues, land issues, the various contracts, and several agreements with non-power interests such as the hatcheries that depend on our power projects. We think each of the problems can be addressed in development of a specific sale proposal following the guidelines of openness, protecting the interests of the U.S. taxpayers, and recognizing the interests of our power customers and employees.

Question: What is the estimated economic impact on your service area of the proposed repayment procedures?

Answer: Our preliminary studies indicate an impact of about $700,000 per year for the Juneau service area in 1987, 1988, and 1989. We are estimating a 13.5% increase in our wholesale rates for that period. The increase at the retail level would be substantially smaller. I do not believe an increase of this magnitude would cause significant economic problems in the area.

PREPARED STATEMENT FOR THE RECORD Chairman HATFIELD. We do have a statement on behalf of Senator Mattingly we will place in the record at this point. (The statement follows:)

STATEMENT OF SENATOR MATTINGLY Mr. Chairman, I join you in welcoming our witnesses from the power marketing agencies who are appearing before the subcommittee today. I have looked over their testimony, and am generally satisfied that—with only a few minor exceptions-these agencies are indeed performing their jobs as originally envisioned by the Congress in an effective, efficient manner. I know that in my area of the country, the Southeastern PMA has been successful in negotiating and renegotiating contractual agreements which will be beneficial to both the consumers and the Federal Treasury as well. I want to commend Mr. Geisinger, the Southeastern Power Administrator for the job he has done in achieving these results. Of course, I have to keep reminding him that he can't move from Elberton to Atlanta, but other than that we've gotten along pretty well.

We are all aware of the current debate as to whether Congress should or should not depart from the roles originally outlined for the PMA's and whether or not some or all of the revenue-producing assets should be sold to private industry or preference users, thus removing the Federal presence. However, I think that is a debate for a different forum and that we should be looking today at the needs of these agencies as originally constituted and commissioned by Congress.

Mr. Chairman, I may have a few brief questions which I will submit for the record at a later date. Thank you.

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