Legislature(2009 - 2010)BARNES 124

04/12/2010 01:00 PM House RESOURCES

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-- Continued at 4:30 pm Today --
Moved Out of Committee
<Bill Hearing Rescheduled from 4/09/10>
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved Out of Committee
<Bill Held Over from 4/11/10>
Heard & Held
<Bill Held Over from 4/11/10>
                   SB 301-POWER PROJECT FUND                                                                                
1:03:46 PM                                                                                                                    
CO-CHAIR JOHNSON  announced that  the first  order of  business is                                                              
SENATE BILL NO.  301, "An Act relating to the power  project fund;                                                              
authorizing  the Alaska  Energy  Authority to  charge and  collect                                                              
fees relating  to the power  project fund; authorizing  the Alaska                                                              
Energy Authority  to sell  and authorizing  the Alaska  Industrial                                                              
Development and  Export Authority to  purchase loans of  the power                                                              
project  fund; providing  legislative  approval for  the sale  and                                                              
purchase of loans  of the power project fund  under the memorandum                                                              
of understanding  dated February  17, 2010;  and providing  for an                                                              
effective date."                                                                                                                
CO-CHAIR  JOHNSON  reviewed  the  day's  schedule,  including  the                                                              
intent  to go into  executive session  at 4:00  p.m. during  which                                                              
Commissioner Galvin will discuss decoupling per SB 305.                                                                         
1:04:58 PM                                                                                                                    
SARAH   FISHER-GOAD,   Deputy  Director   -   Operations,   Alaska                                                              
Industrial  Development and  Export Authority  (AIDEA) and  Alaska                                                              
Energy  Authority  (AEA),  Department of  Commerce,  Community,  &                                                              
Economic  Development   (DCCED),  on   behalf  of  the   governor,                                                              
informed the  committee that SB  301 relates to the  Power Project                                                              
Fund (PPF), which  is an AEA-owned fund.  This  legislation allows                                                              
AEA to sell the  loan portfolio to AIDEA, which  will provide cash                                                              
to the  PPF for upcoming projects.   Ms. Fisher-Goad  related that                                                              
there has  been much  more demand of  this fund, particularly  for                                                              
renewable  energy  projects.   She  clarified  that SB  301  would                                                              
allow AEA  to sell  the PPF  and for  AIDEA to  purchase it.   The                                                              
aforementioned  would  recapitalize  the  PPF  with  approximately                                                              
$20.6  million.     This  legislation   also  authorizes   AEA  to                                                              
establish  fees  for  the  program   as  there  are  currently  no                                                              
application  or origination fees.   The  Bulk Fuel Revolving  Loan                                                              
Fund does charge  application and origination fees  and the intent                                                              
is to do something similar for PPF loans                                                                                        
1:06:22 PM                                                                                                                    
CO-CHAIR JOHNSON inquired as to why this is necessary.                                                                          
MS. FISHER-GOAD explained  that the primary purpose  is to provide                                                              
new cash for new  projects.  The PPF is approximately  $35 million                                                              
worth of assets,  of which it's not a lot of cash.   Therefore, SB
301 would provide a way to raise cash for new projects.                                                                         
1:06:58 PM                                                                                                                    
CO-CHAIR NEUMAN,  referring to Section  2 of SB 301, asked  if Ms.                                                              
Fisher-Goad  anticipates any  changes in  the regulations  as they                                                              
are repealed and reenacted.                                                                                                     
MS.  FISHER-GOAD clarified  that  Section 2  repeals and  reenacts                                                              
[AS 42.45.010(d)]  in order  to allow  AIDEA to  charge fees.   In                                                              
further response  to Co-Chair  Neuman, Ms. Fisher-Goad  reiterated                                                              
that SB  301 would allow  AIDEA to charge  an application  fee and                                                              
an  origination fee.   She  noted  that in  order to  adopt a  fee                                                              
schedule, a public  process will have to be followed.   In further                                                              
response to  Co-Chair Neuman, Ms.  Fisher-Goad explained  that the                                                              
Renewable Energy  Fund is  a new  program, a grant  recommendation                                                              
program.    The program  is  set  to  go through  five  rounds  of                                                              
project  evaluation and  funding.   Round 1 was  the $100  million                                                              
that AEA received  in fiscal year (FY) 2009 and that  was the only                                                              
round that went  through a Legislative Budget and  Audit Committee                                                              
approval  process.  Last  year, the  legislature appropriated  $25                                                              
million and directed  AEA to use its list of projects  to fund $25                                                              
million worth  of projects.  Before  the legislature this  year is                                                              
a request for the  Round 3 projects to be funded.   In the capital                                                              
budget that's  still being considered  in the Senate,  the funding                                                              
level requested  is $50 million  for [the Renewable  Energy Fund].                                                              
One of  the evaluation criteria  for the Renewable Energy  Fund is                                                              
matching funds.   The PPF,  which has been  in existence  for some                                                              
time, has  been a funding source  that's being used for  the match                                                              
requirement for many  local entities that apply  for the Renewable                                                              
Energy  Fund.   The PPF,  she clarified,  exists independently  on                                                              
its own  and has a separate  evaluation process.   Ms. Fisher-Goad                                                              
further  clarified that  no new  program is  being created,  funds                                                              
are just  being provided  to continue to  provide loans  for power                                                              
1:11:06 PM                                                                                                                    
CO-CHAIR NEUMAN  asked from  where the initial  funds for  the PPF                                                              
MS.  FISHER-GOAD said  that although  the  PPF has  existed for  a                                                              
long time,  she didn't  know when  it was  established.   However,                                                              
the PPF  had to have  legislative action  to provide funds  to the                                                              
program.    She   estimated  that  the  aforementioned   may  have                                                              
occurred in the 1980s.   Over the last 10 years,  AEA hasn't had a                                                              
new injection  of cash into the  PPF, save some  specific projects                                                              
through  a match  requirement  that was  through  the Energy  Cost                                                              
Reduction program, which was a Denali Commission funded program.                                                                
1:12:27 PM                                                                                                                    
REPRESENTATIVE  SEATON related  his understanding  that this  is a                                                              
discussion  of  transferring  actual   securities  rather  than  a                                                              
securitized package.                                                                                                            
MS. FISHER-GOAD explained  that AIDEA would purchase  [the PPF] as                                                              
an  investment, and  therefore AIDEA  receives the  loans and  the                                                              
associated  cash flow.   However,  AEA receives  the cash  that is                                                              
the value  of those loans.   She further explained that  AEA would                                                              
receive the cash  to be injected into the fund,  while AIDEA would                                                              
receive the  investment and the  cash flow of those  loan payments                                                              
from now until  they mature.  She  recalled that one of  the loans                                                              
matures in 20 years.                                                                                                            
REPRESENTATIVE  SEATON  said  that  he  wanted to  be  clear  that                                                              
[AIDEA]  is  actually  purchasing   the  entire  loan,  but  isn't                                                              
creating a securitized loan package.                                                                                            
MS. FISHER-GOAD  guaranteed that  [under SB  301] it's  strictly a                                                              
"cash for future cash flow" transaction.                                                                                        
1:14:19 PM                                                                                                                    
CO-CHAIR JOHNSON  pointed out  that there  are some zero  interest                                                              
loans, and inquired as to the value they have.                                                                                  
MS. FISHER-GOAD clarified  that a discount rate for  the cash flow                                                              
is applied  for AIDEA's  purchase  price.  For  example, the  cash                                                              
flow is  the 30 years  of principal  and interest payments,  which                                                              
is  discounted back  at  a 6.02  percent  interest rate  discount.                                                              
Therefore,  AIDEA  would  pay  approximately   $20.6  million  for                                                              
future cash flow of approximately $24-$27 million.                                                                              
1:15:15 PM                                                                                                                    
CO-CHAIR  JOHNSON, after  ascertaining no  one wished to  testify,                                                              
closed public testimony.                                                                                                        
1:15:55 PM                                                                                                                    
CO-CHAIR JOHNSON  requested an explanation  of the  larger picture                                                              
of what is being done.                                                                                                          
MS. FISHER-GOAD  informed the committee  that with the  passage of                                                              
SB 301,  HB 412  will receive capitalization  that was  originally                                                              
proposed in  the governor's budget  for the PPF.   Therefore, it's                                                              
a situation  in which the $7  million requested in  the governor's                                                              
budget  would be  reduced  by  the $3.5  million  to  pay for  the                                                              
fiscal note on [HB 412], the micro loan program.                                                                                
1:17:17 PM                                                                                                                    
CO-CHAIR  JOHNSON  noted  that  SB  301,  with  a  savings  of  $3                                                              
million, will next go to the House Finance Committee.                                                                           
1:17:33 PM                                                                                                                    
CO-CHAIR  NEUMAN moved  to report  SB  301 out  of committee  with                                                              
individual  recommendations  and  the accompanying  fiscal  notes.                                                              
There being no objection, it was so ordered.                                                                                    
1:18:09 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             

Document Name Date/Time Subjects
SB 144 Bill Packet.pdf HRES 4/12/2010 1:00:00 PM
SB 144
SB 301 Bill Packet.pdf HRES 4/12/2010 1:00:00 PM
SB 301