Legislature(2017 - 2018)BARNES 124

03/16/2018 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 329 REAL ESTATE APPRAISAL MNGMT. COMPANIES TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 374 ON-BILL FINANCING OF ENERGY IMPROVEMENTS TELECONFERENCED
Heard & Held
-- Public Testimony --
+ SB 4 BARBERS/HAIRDRESSERS;CHEMICALS;BRAIDING TELECONFERENCED
<Bill Hearing Canceled>
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
         HB 374-ON-BILL FINANCING OF ENERGY IMPROVEMENTS                                                                    
                                                                                                                                
4:06:46 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  announced that the  final order of business  would be                                                               
HOUSE BILL NO.  374, "An Act relating to on-bill  financing by an                                                               
electric  or   gas  distribution   utility  for   certain  energy                                                               
efficiency and conservation improvements."                                                                                      
                                                                                                                                
4:07:06 PM                                                                                                                    
                                                                                                                                
ROB  EARL,   Staff,  Representative   Adam  Wool,   Alaska  State                                                               
Legislature, presented  HB 374 on behalf  of Representative Wool,                                                               
prime sponsor.   He paraphrased  the sponsor  statement [included                                                               
in   committee  packet],   which  reads   as  follows   [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     HB 374 would  allow a utility to  voluntarily create an                                                                    
     on-bill financing or on-bill  repayment program to help                                                                    
     customers finance energy  improvements. The improvement                                                                    
     must utilize  renewable energy or include  switching to                                                                    
     a more efficient device or  fuel that does not increase                                                                    
     greenhouse  gas  emissions.  This legislation  will  be                                                                    
     particularly  useful  as  the Interior  Energy  Project                                                                    
     expands  its  reach and  a  large  number of  Fairbanks                                                                    
     residents choose to convert from  oil to natural gas to                                                                    
     heat their homes.                                                                                                          
                                                                                                                                
     The   on-bill  financing   program  allows   a  utility                                                                    
     customer to borrow money for  an energy improvement and                                                                    
     then repay it through  a "meter conservation charge" on                                                                    
     their  utility bill.  A customer's  utility bill,  even                                                                    
     with   the   meter   conservation  charge,   is   often                                                                    
     immediately lower  due to savings  in energy  costs due                                                                    
     to increased efficiency.                                                                                                   
                                                                                                                                
     Examples  of  energy  improvements that  would  qualify                                                                    
     under HB 374  include: adding solar panels  to a house;                                                                    
     converting  to  a  cleaner   burning  wood  stove;  and                                                                    
     converting  a   boiler  or  furnace  to   natural  gas.                                                                    
     Weatherization  projects such  as upgrading  windows or                                                                    
     insulation would not quality under this legislation.                                                                       
                                                                                                                                
     HB 374 allows for utilities to create either an "on-                                                                       
     bill  financing"  or  an "on-bill  repayment"  program.                                                                    
     Under the former type of  program, the utility provides                                                                    
     the capital for the loan  to the customer and under the                                                                    
     latter  a  third   party  financial  institution  would                                                                    
     provide the capital.                                                                                                       
                                                                                                                                
     A  utility may  recoup  all of  their costs  associated                                                                    
     with the program  through a line item on the  bill of a                                                                    
     customer who has elected to  utilize the program for an                                                                    
     energy improvement. The balance of  the costs on an on-                                                                    
     bill  financing  agreement  may  be  recovered  by  the                                                                    
     utility when a property is sold.                                                                                           
                                                                                                                                
     HB  374 provides  an optional  tool  for utilities  and                                                                    
     their customers  to lower energy costs  and improve air                                                                    
     quality in Alaska.                                                                                                         
                                                                                                                                
4:10:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD asked  how the transactions would                                                               
work if she decided to put a wind turbine on her property.                                                                      
                                                                                                                                
MR. EARL answered the electrical  company would have to implement                                                               
the  program.   He suggested  it may  engage a  bank and  if wind                                                               
turbine  was included  in  the  options for  things  that can  be                                                               
financed,  the  utility  would  act  as  "pass-through"  for  the                                                               
repayment.  He said there  would probably be an additional charge                                                               
on  the  utility bill  to  repay  the  costs.  He said  it's  not                                                               
specified  in the  bill what  the rate  of interest  on repayment                                                               
would be.                                                                                                                       
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD surmised the  whole premise is to                                                               
lower  electricity costs.   She  asked how  the bill  would lower                                                               
costs.                                                                                                                          
                                                                                                                                
MR. EARL  explained the lending  institution has  extra assurance                                                               
that if  the loan is behind,  the utility will shut  off power to                                                               
the customer.   He gave the example of a  $5,000 improvement with                                                               
a 10-year  loan, at 3  percent the  payment added to  the monthly                                                               
bill would be around  $48.  He said once the  charge is paid off,                                                               
the total  bill would  almost certainly be  lower going  into the                                                               
future.                                                                                                                         
                                                                                                                                
4:14:02 PM                                                                                                                    
                                                                                                                                
GENE  THERRIAULT,   Alaska  Industrial  Development   and  Export                                                               
Authority (AIDEA);  Interior Energy  Project (IEP),  testified in                                                               
the hearing  on HB  374.    He said  Alaska Energy  Authority and                                                               
AIDEA had  worked together with  Interior communities for  a more                                                               
affordable, cleaner  source of  fuel.   He informed  the Property                                                               
Assessed  Clean Energy  Act (PACE)  legislation put  in place  to                                                               
target businesses  and the on-bill  mechanism of HB 374  has many                                                               
of the  same attributes  of the PACE  legislation.   He explained                                                               
the monthly  bill would be  used as a  means to recapture  a loan                                                               
payment for converting  property to natural gas  or solar panels.                                                               
He  said that  by attaching  or  borrowing the  strength of  that                                                               
relationship, it  could lower rates  of default.  He  added lower                                                               
default leads to lower interest rates.                                                                                          
                                                                                                                                
MR. THERRIAULT  referred to a  working group  that was set  up in                                                               
the  Interior to  examine ways  of incenting  customers to  avail                                                               
themselves of the mechanisms for transferring to natural gas.                                                                   
He said the participants were asked  to bring in recent bills and                                                               
then answer  questions.  He stated  he was surprised that  an on-                                                               
bill repayment mechanism  was more popular than  a lower interest                                                               
rate for a  loan.  He said the ability  to finance an improvement                                                               
on their  property and enjoy  the benefit of the  improvement and                                                               
pass on  the obligation attached to  the meter to the  next owner                                                               
was popular.                                                                                                                    
                                                                                                                                
MR. THERRIAULT  spoke to research  done with the  Rural Utilities                                                               
Service  (RUS)  program  at  the   United  States  Department  of                                                               
Agriculture  (USDA)   for  federal   funds  that   could  provide                                                               
financing to  the consumer.   He  said he  was surprised  to find                                                               
that  on-bill financing  was  proposed  as a  way  to ensure  low                                                               
default  rates associated  with  the  lending.   He  said if  the                                                               
federal program  was to offer  low interest money, it  would want                                                               
to ensure it is involved in low risk lending.                                                                                   
                                                                                                                                
MR.  THERRIAULT  said a  lot  of  arrangements made  between  the                                                               
parties  would  be put  down  in  contracts  to ensure  that  the                                                               
utility passes on  the repayment to the lending  institution.  He                                                               
stated that on  behalf of AIDEA and IEP, it  is an important tool                                                               
for utilities.   He  spoke to further  research on  other states'                                                               
approach to on-bill financing and  on state statutes to determine                                                               
if  legislation is  absolutely necessary.    He indicated  Alaska                                                               
state statute is silent on the  issue.  He said the proposed bill                                                               
would clarify  in state law  that on-bill financing  is available                                                               
on a voluntary basis.                                                                                                           
                                                                                                                                
4:22:06 PM                                                                                                                    
                                                                                                                                
JOMO STEWART,  General Manager,  Interior Gas  Utility, testified                                                               
in  support  of  HB  374.     He  thanked  the  sponsor  for  the                                                               
legislation.                                                                                                                    
                                                                                                                                
4:22:43 PM                                                                                                                    
                                                                                                                                
ALEC  MESDAG, Director,  Energy Services,  Alaska Electric  Light                                                               
and Power (AEL&P), testified in support  of HB 374.  He explained                                                               
this  bill  will  provide a  valuable  tool,  particularly  among                                                               
consumers that  have limited options.   He surmised  the proposed                                                               
bill wouldn't create an initial  decrease in bills but that there                                                               
is still a lot of value in it.   He suggested there is a tendency                                                               
to  underestimate  comfort  as  a defining  factor.    He  stated                                                               
updating windows may  not directly decrease bills,  but the added                                                               
comfort would impact  how high the heat is kept.  He mentioned it                                                               
would be  important to  review how fuel  switching is  defined in                                                               
the proposed  bill.   He suggested  it may  be useful  to include                                                               
some  language  to  grant discretion  to  utilities  to  preclude                                                               
certain measures that could be a detriment to the system.                                                                       
                                                                                                                                
4:27:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked how the sponsor  would know about                                                               
what AEL&P would accept as a conservation measure.                                                                              
                                                                                                                                
MR. MESDAG  said his  concerns were  very system-specific,  so it                                                               
would need to be a general allowance.                                                                                           
                                                                                                                                
4:28:16 PM                                                                                                                    
                                                                                                                                
CHAIR KITO opened public testimony on HB 374.                                                                                   
                                                                                                                                
4:28:35 PM                                                                                                                    
                                                                                                                                
STUART COHEN,  Interfaith Power and  Light, testified  in support                                                               
of HB 374.  He said  Interfaith Power and Light was attempting to                                                               
implement a  program that replaces  inefficient oil  and electric                                                               
heating systems with air source heat  pumps.  He explained a heat                                                               
pump is like  an air conditioner and can reduce  heating bills by                                                               
40  percent to  70 percent.   He  said it  costs about  $4,100 to                                                               
install. He said  they are used in China because  the systems are                                                               
cheap.    He spoke  to  modelling  in  Juneau, Alaska,  on  8,901                                                               
private buildings.   He said  if Juneau, Alaska, were  to convert                                                               
all  8,901  buildings in  the  model,  the energy  savings  would                                                               
amount to  nearly $10 million  a year.   He said the  company who                                                               
carried  out the  modelling  said that  quick  finance system  is                                                               
crucial.  He said  that for those with a low  income, it could be                                                               
hard to  come up with  the money for  a heat  pump.  He  said the                                                               
proposed bill,  by enabling third  party financing,  would reduce                                                               
the risk for both borrower and lender.                                                                                          
                                                                                                                                
4:32:47 PM                                                                                                                    
                                                                                                                                
CEAL SMITH,  Alaska Climate Action Network,  testified in support                                                               
of HB 374.  She stated her  organization is very happy to see the                                                               
proposed bill.   She mentioned the language in  the proposed bill                                                               
is not clear regarding weatherization.                                                                                          
                                                                                                                                
4:35:43 PM                                                                                                                    
                                                                                                                                
CORY BORGESON, CEO, Golden Valley  Electric, testified in support                                                               
of HB 374.   He stated his is a  not-for-profit electric utility.                                                               
He  said he  thinks  the proposed  bill is  "fairly  broad."   He                                                               
indicated he was not certain  that Golden Valley "would jump into                                                               
this," but that there are  opportunities to provide financing for                                                               
its consumers to move into renewable energy products.                                                                           
                                                                                                                                
4:37:45 PM                                                                                                                    
                                                                                                                                
CHAIR KITO held over HB 374.                                                                                                    

Document Name Date/Time Subjects
HB329 Fiscal Note DCCED CBPL 3.2.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Letters of Support 2.24.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Sectional Analysis 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Sponsor Statement 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - staggered effective date graphic 3.15.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - Wells Fargo 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 ver O 2.23.18.PDF HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Document-Federally-Related Transactions defined 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Document-REVAA's Answers to Sponsor's Questions 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Documents-Leg Research, other states' bonds 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Document-Appraisal Bd Chair's Response to Sponsor's Questions 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - REVAA 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Letters of Support 2.24.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Sectional Analysis 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - Wells Fargo 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - staggered effective date graphic 3.15.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB374 Sponsor Statement 2.28.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Sectional Analysis - Version N 3.8.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Supporting Document - DOE Summary of On-Bill Financing 2.27.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB 374 Version U 2.28.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 ver J.PDF HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Explanation of Changes from Version J to Version N.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Fiscal Note DCCED-RCA 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Letters of Support.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 version N.PDF HL&C 3/16/2018 3:15:00 PM
HB 374