Legislature(2015 - 2016)CAPITOL 17

02/26/2015 10:15 AM ENERGY

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Audio Topic
10:20:48 AM Start
10:22:07 AM Presentation: Alaska Housing Finance Corporation
10:25:37 AM HB58
11:20:50 AM HB78
12:01:54 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 58 ELIGIBILITY FOR AK ENERGY EFFIC LOANS TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 78 REGULATORY COMMISSION OF ALASKA TELECONFERENCED
Heard & Held
+ Overview Presentation: TELECONFERENCED
Follow-up Report by the Alaska Housing Finance
Corporation by John Anderson, Alaska Housing
Finance Corporation
          HB 58-ELIGIBILITY FOR AK ENERGY EFFIC LOANS                                                                       
                                                                                                                                
10:25:37 AM                                                                                                                   
                                                                                                                                
CO-CHAIR VAZQUEZ announced that the  next order of business would                                                               
be HOUSE  BILL NO. 58,  "An Act making  an entity that  is exempt                                                               
from  federal  taxation  under   26  U.S.C.  501(c)(3)  (Internal                                                               
Revenue Code)  and a  federally recognized  tribe eligible  for a                                                               
loan from the  Alaska energy efficiency revolving  loan fund; and                                                               
relating  to loans  from the  Alaska energy  efficiency revolving                                                               
loan fund."                                                                                                                     
                                                                                                                                
[Before the  committee was the  committee substitute (CS)  for HB
58, labeled  29-LS0254\H, Nauman,  1/27/15, which was  adopted by                                                               
the committee on 2/24/15.]                                                                                                      
                                                                                                                                
10:26:09 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE    JONATHAN     KREISS-TOMKINS,    Alaska    State                                                               
Legislature,  sponsor  of  HB  58,  informed  the  committee  the                                                               
substantive  change between  HB 58  and the  committee substitute                                                               
for HB 58,  [29-LS0254\H, Nauman, 1/27/15], was  the inclusion of                                                               
additional  nonprofit entities  such as  the Veterans  of Foreign                                                               
Wars (VFW)  and American Legion organizations,  which qualify for                                                               
a separate tax-exempt status.                                                                                                   
                                                                                                                                
10:27:13 AM                                                                                                                   
                                                                                                                                
The committee took a brief at ease.                                                                                             
                                                                                                                                
10:28:15 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS   clarified   that   before   the                                                               
committee was the CS for HB 58, Version H.                                                                                      
                                                                                                                                
CO-CHAIR  VAZQUEZ asked  for a  page-by-page  explanation of  the                                                               
changes to the bill.                                                                                                            
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS directed attention  to Version H on                                                               
page 4, lines 17-18, which read:                                                                                                
                                                                                                                                
     (3)  "tax-exempt entity" means an entity designated as                                                                   
      tax exempt under 26U.S.C.501(c)(3),(4),(6),(12), or                                                                     
     (19)(Internal Revenue Code).                                                                                             
                                                                                                                                
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS explained  that there are different                                                               
kinds  of  nonprofits  under  tax code  501(c)(3).    In  further                                                               
response to Co-Chair Vazquez, he  said the CS includes additional                                                               
nonprofit tax  exempt entities such  as those that  qualify under                                                               
501(c)(19).                                                                                                                     
                                                                                                                                
CO-CHAIR VAZQUEZ asked how the tax code differs.                                                                                
                                                                                                                                
10:30:39 AM                                                                                                                   
                                                                                                                                
MIGUEL   RORHBACHER,  Staff,   Representative  Jonathan   Kreiss-                                                               
Tomkins,  Alaska   State  Legislature,  speaking  on   behalf  of                                                               
Representative  Kreiss-Tomkins, sponsor  of HB  58, informed  the                                                               
committee that examples  of nonprofits are as follows:   (c)(3) -                                                               
United Way  and food banks; (c)(4)  - League of Women  Voters and                                                               
community softball  leagues; (c)(6) - business  organizations and                                                               
chambers  of   commerce;  (c)(12)  -  utility   and  agricultural                                                               
cooperatives; (c)(19) - veteran's services.                                                                                     
                                                                                                                                
10:33:03 AM                                                                                                                   
                                                                                                                                
JOHN  ANDERSON,   Director,  Division   of  Research   and  Rural                                                               
Development,   Alaska   Housing   Finance   Corporation   (AHFC),                                                               
Department of Revenue (DOR), said  he was available for questions                                                               
and Alaska  Housing Finance  Corporation had  no position  on the                                                               
bill.                                                                                                                           
                                                                                                                                
CO-CHAIR VAZQUEZ asked whether HB 58  would have an impact on the                                                               
[Alaska  energy  efficiency   revolving  loan  program  (AEERLP),                                                               
Alaska   Energy  Authority,   (AEA),   Department  of   Commerce,                                                               
Community & Economic Development (DCCED].                                                                                       
                                                                                                                                
MR. ANDERSON was unsure.  There  could be an increase of activity                                                               
but  that  is unknown  at  this  time.   Alaska  Housing  Finance                                                               
Corporation outreach  related to the energy  efficiency revolving                                                               
loan fund  program (AEERLP)  has involved  many of  the nonprofit                                                               
entities  identified  by  the proposed  legislation.  In  further                                                               
response   to  Co-Chair   Vazquez,   he  said   the  program   is                                                               
administered  by AHFC,  and the  last  loan approved  was to  the                                                               
Department of Transportation & Public  Facilities (DOT&PF) in the                                                               
amount of  $3.7 million,  at 3.6 percent  interest for  a 15-year                                                               
term.                                                                                                                           
                                                                                                                                
10:35:17 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TILTON  surmised the  bill extends  eligibility to                                                               
some  tribal entities,  and  the CS  adds  other nonprofits,  but                                                               
there are  no eligible entities  that have been awarded  funds at                                                               
this time.                                                                                                                      
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS   said    the   fund   has   been                                                               
underutilized to date.                                                                                                          
                                                                                                                                
REPRESENTATIVE TILTON observed that the  fund has not been used -                                                               
perhaps because  grants have  been available -  and asked  if the                                                               
fund may  not be necessary.   She said, "Do  you have kind  of an                                                               
idea  ... how  many different  entities would  be, this  would be                                                               
able to open it up for?"                                                                                                        
                                                                                                                                
MR. ANDERSON  pointed out that  the fund is not  "sitting there."                                                               
Senate Bill  220 [passed  in the  26th Alaska  State Legislature]                                                               
provided AHFC the  authority to bond for $250 million.   In fact,                                                               
AHFC intends to  identify a group of projects and  then apply for                                                               
bonding.  In  further response to Representative  Tilton, he said                                                               
the  interest  rates  are   determined  through  a  market-driven                                                               
process and AHFC strives to make the best use of the program.                                                                   
                                                                                                                                
REPRESENTATIVE TILTON asked whether  other funds are available to                                                               
nonprofit entities for energy efficiency.                                                                                       
                                                                                                                                
MR.  ANDERSON said  AHFC was  not  aware of  any other  financing                                                               
mechanisms within state agencies.                                                                                               
                                                                                                                                
10:39:49 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  WOOL  asked  how  the program  differs  from  the                                                               
[Alaska    Housing   Finance    Corporation   (AHFC)    homeowner                                                               
weatherization and energy efficiency programs].                                                                                 
                                                                                                                                
MR. ANDERSON advised that  residential energy efficient retrofits                                                               
are simple when compared to  commercial projects.  Superficially,                                                               
the  two programs  are similar  in concept  in that  an audit  is                                                               
done,  the improvements  are  made, and  a  post-audit shows  the                                                               
increase in energy efficiency;  however, commercial buildings are                                                               
more in-depth.   In further  response to Representative  Wool, he                                                               
affirmed that  the program is  intended for public  facilities or                                                               
commercial operations of any size.                                                                                              
                                                                                                                                
REPRESENTATIVE TILTON asked for an example of a project.                                                                        
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS said  examples in  Fairbanks would                                                               
be provided.                                                                                                                    
                                                                                                                                
CO-CHAIR VAZQUEZ inquired as to pending applications.                                                                           
                                                                                                                                
10:42:43 AM                                                                                                                   
                                                                                                                                
MR. ANDERSON  said about  six applications  are in  the technical                                                               
review process.     In further response  to Co-Chair  Vazquez, he                                                               
advised  that over  the past  two  years AHFC  has provided  many                                                               
presentations to organizations such  as Rotary International, the                                                               
Alaska Municipal  League, the Institute of  Architects, Renewable                                                               
Energy  Alaska Project,  and the  Alaska Association  of Facility                                                               
Administrators.    In fact, a large  energy efficiency conference                                                               
in   Anchorage   is  upcoming   that   will   reach  many   other                                                               
organizations.   Although  AHFC has  no operating  funds for  the                                                               
program, presentation requests are  fulfilled by staff, including                                                               
contacts with DOT&PF,  and the Department of  Education and Early                                                               
Development (EED).                                                                                                              
                                                                                                                                
CO-CHAIR  VAZQUEZ asked  for an  example of  the kind  of project                                                               
that can be financed through the loan program.                                                                                  
                                                                                                                                
MR.  ANDERSON   noted  that  the   loan  program   could  replace                                                               
fluorescent lights  with LEDs, replace  old boilers  with energy-                                                               
efficient boilers,  remove windows,  add insulation,  and install                                                               
better heating and ventilation systems.                                                                                         
                                                                                                                                
REPRESENTATIVE  TILTON asked  whether the  bill would  extend the                                                               
loan program to for-profit tribal entities.                                                                                     
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS expressed his  belief that the bill                                                               
would  do so.   He  directed attention  to page  4, lines  15-16,                                                               
which read:                                                                                                                     
                                                                                                                                
      (B) includes a subdivision, subsidiary, or business                                                                       
       enterprise wholly owned by a federally recognized                                                                        
     tribe;                                                                                                                     
                                                                                                                                
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS  said he would accept  an amendment                                                               
to exempt  business enterprises and  limit loan  qualification to                                                               
the service-delivery entities which make  up 98 percent of tribal                                                               
activity in  Alaska.   In  response to Co-Chair Vazquez,  he said                                                               
the bill has a zero fiscal note.                                                                                                
                                                                                                                                
10:48:01 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TALERICO  asked whether  the sponsor  would object                                                               
to "a  sunset on  the eligibility for  the nonprofits  and tribal                                                               
entities."                                                                                                                      
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS  said  he would  welcome  such  an                                                               
amendment.  He  assured the committee the intent  of the proposed                                                               
legislation was to help public  facilities above nonprofits, thus                                                               
another possible  amendment would  be to create  a prioritization                                                               
so AHFC  satisfies the  needs of public  facilities first.   This                                                               
may be a  different way to accomplish a sunset,  or both concepts                                                               
may be included in a future CS.                                                                                                 
                                                                                                                                
REPRESENTATIVE  TALERICO   asked  the  sponsor  to   provide  the                                                               
aforementioned concepts to the committee.                                                                                       
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS agreed.                                                                                           
                                                                                                                                
[The committee treated public comment as open on HB 58.]                                                                        
                                                                                                                                
10:51:15 AM                                                                                                                   
                                                                                                                                
CHRIS ROSE,  Executive Director, Renewable Energy  Alaska Project                                                               
(REAP), informed  the committee  REAP is a  coalition of  over 80                                                               
organizations  across  the  state including  electric  utilities,                                                               
Native   corporations,   independent  power   producers   (IPPs),                                                               
developers,   businesses,   and  non-governmental   organizations                                                               
(NGOs).  He  said REAP was very interested in  the loan fund when                                                               
it was established in 2010.   Through [Senate Bill 220, passed in                                                               
the 26th  Alaska State  Legislature], the  state mandated  that a                                                               
certain  percentage of  the state's  public buildings  are to  be                                                               
retrofitted by  2020.   Mr. Rose  said this  is a  very important                                                               
issue for  the state  given its current  economic situation.   He                                                               
recalled  an  AHFC  white  paper  published  10/29/12,  entitled,                                                               
"Energy Use in Alaska's Public  Facilities," which indicated over                                                               
5,000  public buildings  could be  improved by  the current  loan                                                               
program,  but unfortunately,  no loans  have been  executed.   He                                                               
suggested that some potential applicants  are waiting for grants,                                                               
but  said, "Those  days are  certainly over,  at least  for now."                                                               
Potential applicants should be  encouraged because AHFC estimated                                                               
the state spends $642 million  annually on energy, which is close                                                               
to 10  percent of  the state's  operating budget.   A  20 percent                                                               
savings is  possible, after a  retrofit of all of  the buildings,                                                               
and $125  million could  be saved every  year.   Alaska Renewable                                                               
Energy  Project supports  the expansion  of the  program so  that                                                               
qualified  entities and  tribal  organizations may  "get some  of                                                               
these loans  executed."   Another action  that may  encourage the                                                               
use of the program would be for  EED to make it easier for school                                                               
districts  to  participate.   In  conclusion,  REAP supports  the                                                               
expansion of the program, energy efficiency, and saving money.                                                                  
                                                                                                                                
CO-CHAIR VAZQUEZ  said she  had made  the acting  commissioner of                                                               
the Department of  Administration aware of the  program and asked                                                               
Mr. Rose to provide him with further information.                                                                               
                                                                                                                                
10:55:30 AM                                                                                                                   
                                                                                                                                
JOEL NEIMEYER, Federal Co-Chair,  Denali Commission, informed the                                                               
committee  the Denali  Commission, the  Rasmuson Foundation,  and                                                               
the Cold  Climate Housing Research Center  (CCHRC), have embarked                                                               
on  a pilot  effort  in  Fairbanks in  order  to demonstrate  the                                                               
validity  of energy  audits  followed  by a  loan  program.   The                                                               
intent  is to  move the  program  to rural  Alaska, where  energy                                                               
costs  are very  high.   The Denali  Commission regards  the loan                                                               
program  as  a  potential  tool for  rural  Alaska  and  supports                                                               
expanding the number  of eligible applicants.   Mr. Neimeyer said                                                               
work done  on a  community scale is  more efficient  as contracts                                                               
for the energy audits, the  construction of improvements, and the                                                               
post-construction monitoring  would be bundled.   The  program is                                                               
an important tool for rural and urban Alaska.                                                                                   
                                                                                                                                
10:57:42 AM                                                                                                                   
                                                                                                                                
DANIEL POWERS,  Coordinator, Fairbanks Nonprofit  Retrofit Pilot,                                                               
CCHRC,  informed the  committee he  is working  on the  Fairbanks                                                               
Nonprofit Retrofit Pilot project, one  of the principles of which                                                               
is   that  Alaska   is  stronger   when  nonprofits   and  tribal                                                               
organizations spend less money on  energy.  The project is trying                                                               
to solve the statewide issue  of energy efficiency for nonprofits                                                               
and  has  fourteen nonprofit  and  tribal  participants that  are                                                               
getting energy audits, having  initial meetings with contractors,                                                               
studying the technical documents,  and developing five-year plans                                                               
and strategies for  building owners, whenever possible.   He said                                                               
the  expansion of  the  loan program  offers  advantages such  as                                                               
reduced  requests   for  capital   from  nonprofits   and  tribal                                                               
organizations,  changes in  the  grant-based  culture for  energy                                                               
efficiency projects,  and reduced operating costs  for nonprofits                                                               
and tribal organizations.  The  project is collecting information                                                               
from  each  participant  about   barriers  to  lending,  and  the                                                               
barriers seen  by auditors and  funders.  The bill  expands state                                                               
resources to  the organizations  that provide  essential services                                                               
to citizens.  Mr. Powers stated his support for HB 58.                                                                          
                                                                                                                                
11:01:36 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE WOOL asked for the status of the projects.                                                                       
                                                                                                                                
MR. POWERS answered that the  audits were completed last year and                                                               
quotes  from  contractors are  being  collected.   The  Fairbanks                                                               
Resource  Agency  office  building   is  completed  with  boilers                                                               
installed  and energy  monitoring in  place.   Using a  loan, the                                                               
agency  installed energy  efficient  boilers and  smart pumps  to                                                               
reduce  its  electrical  load.    Other  recommendations  include                                                               
adding insulation and  extending a hot water line  to an adjacent                                                               
property  to  save  energy  and   cost.    Out  of  the  fourteen                                                               
nonprofits,  about seven  nonprofits are  still in  the decision-                                                               
making  process  to determine  if  they  can accept  the  payback                                                               
schedule and  follow the recommendations  of the audit.   He said                                                               
he expected a  busy construction season to  complete the projects                                                               
that have  financing through the  Denali Commission  and Rasmuson                                                               
Foundation.  In further response  to Representative Wool, he said                                                               
he did  not have sufficient  information to support  the estimate                                                               
of 20  percent savings  made by a  previous speaker  because each                                                               
building and  audit are different;   also, there is  the question                                                               
of whether  nonprofits can afford  to make improvements  that are                                                               
paid  back from  the  cash flow  of energy  savings.   The  pilot                                                               
project was tasked to find the  point of economy for the retrofit                                                               
marketplace so as not to overinvest.                                                                                            
                                                                                                                                
11:06:54 AM                                                                                                                   
                                                                                                                                
DAVE MESSIER, Rural Energy  Coordinator, Tanana Chiefs Conference                                                               
(TCC),  informed   the  committee  TCC  is   a  nonprofit  tribal                                                               
consortium that works with 42  federally recognized tribes in the                                                               
Interior.  He  said he is in strong support  of the modifications                                                               
to the Alaska  energy efficiency revolving loan  fund proposed in                                                               
HB 58.   The electricity rates in the region  are high and energy                                                               
efficiency  projects   have  saved  school   districts,  clinics,                                                               
tribes, and cities tens of  thousands of dollars in energy costs.                                                               
Expanding  access  to  the program  would  assure  entities  have                                                               
access to  funding for retrofitting  facilities in  rural Alaska,                                                               
Fairbanks, and  across the state.   The Tanana  Chiefs Conference                                                               
is a nonprofit  that would benefit from  the proposed legislation                                                               
in that it  operates more than 200,000 square feet  of clinic and                                                               
office space in  Fairbanks, and it supports  any legislation that                                                               
makes energy efficiency funding  easier to access for nonprofits.                                                               
Spending  money wisely  for energy  means  money can  be used  to                                                               
better  serve Alaskans  who are  in need  of help.   Mr.  Messier                                                               
added  that from  his experience  in the  energy field,  he knows                                                               
that technology  change takes time  and successful  projects will                                                               
lead to more success.                                                                                                           
                                                                                                                                
CO-CHAIR  VAZQUEZ  stated her  concerns  about  whether there  is                                                               
sufficient staffing  to administer the  program and if  there are                                                               
safeguards to minimize loan defaults.                                                                                           
                                                                                                                                
11:11:44 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE    KREISS-TOMKINS    reviewed   the    committee's                                                               
suggestions  for a  new proposed  CS:   create  a structure  that                                                               
guarantees public  facilities have  first priority access  to the                                                               
revolving loan  fund; clarify the line  between for-profit tribal                                                               
enterprises  and  nonprofit  tribal  organizations  that  deliver                                                               
services to  Alaskans; default  safeguards; address  the staffing                                                               
issue.                                                                                                                          
                                                                                                                                
CO-CHAIR VAZQUEZ closed public testimony on HB 58.                                                                              
                                                                                                                                
HB 58 was held over.                                                                                                            
                                                                                                                                
11:13:17 AM                                                                                                                   
                                                                                                                                
The committee took an at ease from 11:13 a.m. to 11:20 a.m.                                                                     
                                                                                                                                

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