Legislature(2009 - 2010)BUTROVICH 205

02/15/2010 03:30 PM Senate RESOURCES

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03:34:28 PM Start
03:35:29 PM SB220
05:01:56 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
          SB 220-ENERGY EFFICIENCY/ ALTERNATIVE ENERGY                                                                      
3:35:29 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI  announced SB 220 [version  26-LS1197\C was                                                               
before the  committee] to  be up for  consideration. He  said the                                                               
committee substitute (CS) was a  product of many discussions with                                                               
the  administration on  implementing the  provisions. He  thanked                                                               
the members of  the administration for their  willingness to work                                                               
so intensively with staff.                                                                                                      
SENATOR  FRENCH  moved  to  adopt   CSSB  220(RES)  [version  26-                                                               
LS1197\K]. There were no objections and it was so ordered.                                                                      
3:36:12 PM                                                                                                                    
MICHELLE SYDEMAN,  aide to Co-chair  Wielechowski, said  that she                                                               
and Mike Pawlowski,  aide to Co-chair McGuire,  would explain the                                                               
committee substitute (CS)  to SB 220.  To begin  she said Section                                                               
1 is  simply the short  title and it has  no change -  it remains                                                               
the  Alaska  Sustainable Energy  Act.  Section  2 had  the  first                                                               
change  and  was initially  a  policy  statement suggested  by  a                                                               
stakeholder group representing  diverse interests pulled together                                                               
by the House  Energy Committee. The statement used  to be towards                                                               
the middle  or the  end of  the bill and  it was  going to  be in                                                               
statute. In  a meeting facilitated by  the Governor's legislative                                                               
director,  several representatives  from  the  Department of  Law                                                               
cautioned  them against  putting  the policy  in statute  because                                                               
many of  the goals  were "aspirational" and  might not  be easily                                                               
met.  The DOL  representatives said  the state  could be  held to                                                               
some of  those goals and could  be sued if for  some reason those                                                               
goals  weren't  met.  So,  that   section  was  pulled  into  the                                                               
beginning of the bill as uncodified law and intent language.                                                                    
3:38:40 PM                                                                                                                    
MIKE PAWLOWSKI,  aide to Senator  McGuire, said the  previous two                                                               
section items  on page 2,  lines 5-6, and  page 2, line  21, were                                                               
the  step  goals for  energy  efficiency  of  10 percent  and  15                                                               
percent (on lines  5-6). The goal of 50  percent renewable energy                                                               
was on line  21. They were originally included  as distinct items                                                               
that have now been rolled into the policy section of the bill.                                                                  
SENATOR STEDMAN said he was  concerned that they didn't just pick                                                               
numbers out of the sky.                                                                                                         
MS. SYDEMAN  responded that  many states had  set goals  and some                                                               
were set  many years  ago, so  they looked  at what  other states                                                               
were able  to achieve.  They also would  reference later  a pilot                                                               
project  just carried  out by  the Anchorage  School District  in                                                               
which they  achieved significant  reductions in gas  and electric                                                               
use.  Both the  House  and  Senate staff  felt  these goals  were                                                               
achievable during this timeframe.                                                                                               
SENATOR STEDMAN said  he was still concerned that  the goals were                                                               
solid  because  he  thought  as the  state  goes  forward  energy                                                               
consumption would increase along with the efficiencies.                                                                         
3:40:52 PM                                                                                                                    
CO-CHAIR  WIELECHOWSKI  asked  for   documentation  by  the  next                                                               
meeting on why that figure was used.                                                                                            
MR. PAWLOWSKI  responded that similar concerns  were expressed by                                                               
the Department  of Transportation  and Public  Facilities (DOTPF)                                                               
and  other agencies,  so on  page 2,  line 6,  the year  2010 was                                                               
established as a zero baseline to measure from.                                                                                 
MS. SYDEMAN clarified  that they did refer to the  fact that they                                                               
would  need to  account  for growth  in  population and  economic                                                               
development in the energy efficiency goal on page 2, lines 6-7.                                                                 
SENATOR HUGGINS  asked if federal renewable  energy policy didn't                                                               
include hydro.                                                                                                                  
MS. SYDEMAN responded that was the current state of affairs.                                                                    
SENATOR HUGGINS asked why they  wouldn't include nuclear, so at a                                                               
future date  it wouldn't be  precluded and someone would  have to                                                               
change it.                                                                                                                      
CO-CHAIR  WIELECHOWSKI  said  this  body did  pass  a  resolution                                                               
urging Congress to include hydro  as a renewable resource and the                                                               
Legislature  and state  have been  having discussions  on nuclear                                                               
energy and will continue those.                                                                                                 
3:43:14 PM                                                                                                                    
SENATOR  STEDMAN asked  what language  on  page 2,  line 29  [(D)                                                               
creating and  maintaining a state  fiscal regime  that encourages                                                               
private  sector development  of the  state's energy  resources;],                                                               
MS.  SYDEMAN  replied that  language  came  from the  stakeholder                                                               
group, but they could get clarification.                                                                                        
3:43:57 PM                                                                                                                    
She said Sections 3 and 4 had no substantive changes.                                                                           
3:44:32 PM                                                                                                                    
BRIAN  BUTCHER,  Director,   Governmental  Relations  and  Public                                                               
Affairs, Alaska Housing Finance  Corporation (AHFC), commented on                                                               
Section  4  that  of  the  $28 million  in  stimulus  funds  they                                                               
received  last   summer,  $4  million   was  earmarked   for  the                                                               
Corporation  to develop  software to  do ratings  for residential                                                               
homes  to expand  it  to  commercial as  well  as  work to  begin                                                               
educating various communities on  the issues of energy efficiency                                                               
and  with the  expansion to  commercial. The  U.S. Department  of                                                               
Energy (USDOE)  just approved  the state plan  a couple  of weeks                                                               
3:46:05 PM                                                                                                                    
CO-CHAIR   WIELECHOWSKI  asked   if  he   thought  working   with                                                               
municipalities and corporations would  help make public buildings                                                               
more energy efficient.                                                                                                          
MR. BUTHCER  replied yes. He  reminded them that  the Legislature                                                               
appropriated $360 million for  residential weatherization and the                                                               
Home Energy Rebate Program. At the  time they were all aware that                                                               
increasing  the energy  efficiency  of residential  homes in  all                                                               
areas  of the  state  is  a positive  thing,  but  when you  have                                                               
schools,  other  government  buildings and  commercial  buildings                                                               
still using a tremendous amount  of energy, particularly in Rural                                                               
Alaska where it's at the crisis  level, it is something that they                                                               
are excited about moving forward with.                                                                                          
3:47:07 PM                                                                                                                    
MR. PAWLOWSKI said  Section 5, the energy  efficiency grant funds                                                               
section,  was deleted  and  the new  Section 5  is  what the  old                                                               
Section  6, the  alternative energy  for public  works provision,                                                               
was in the  C version. Changes were made to  this section working                                                               
with the DOTPF particularly -  the idea being that the department                                                               
had to predict  which energy sources will  become available. That                                                               
has  been   removed  and  it   is  now  limited   to  considering                                                               
alternative energy  sources in  the design  phase of  a building.                                                               
Further,  a definition  of "construction"  was added  on page  4,                                                               
lines 12  and 13,  so that  when a capital  project -  a retrofit                                                               
reconstruction alteration of a building,  for instance - that the                                                               
requirement  envisioned  by   this  section  isn't  automatically                                                               
triggered by this section.                                                                                                      
CO-CHAIR   WIELECHOWSKI  asked   the  DOTPF   representative  his                                                               
thoughts on Section 5.                                                                                                          
3:48:32 PM                                                                                                                    
JOEL  ST. AUBIN,  Engineer, Statewide  Facilities, Department  of                                                               
Transportation and  Public Facilities  (DOTPF) DOTPF,  said their                                                               
concerns  on Section  5 were  addressed  and he  didn't have  any                                                               
SENATOR FRENCH asked if he  was comfortable with "shall consider"                                                               
language. He wanted to know how  meaningful it was to use it. Was                                                               
it a passing consideration, a day's worth or what?                                                                              
MR. ST. AUBIN answered that  they would take what non-fossil fuel                                                               
designs  that were  in the  marketplace  into consideration  when                                                               
designing  a   facility.  It  would   be  more  than   a  passing                                                               
consideration especially if it's adopted into statute.                                                                          
SENATOR FRENCH asked when the  final decision point is reached on                                                               
that issue.                                                                                                                     
MR.  AUBIN replied  that the  things  they are  to consider  were                                                               
well-outlined on  page 4, lines 3-6,  that says when the  cost is                                                               
not more  than a fossil-fuel  fired system over the  lifecycle of                                                               
the equipment to purchase, install, maintain and operate.                                                                       
3:51:00 PM                                                                                                                    
SENATOR HUGGINS said  when putting elements (A) and  (B) [page 4,                                                               
lines 3-6] together a person  would almost use nothing other than                                                               
fossil fuel, because the other systems cost more.                                                                               
MR. AUBIN replied that he had no comment on that.                                                                               
SENATOR HUGGINS  asked again  if they could  do anything  else if                                                               
those  two elements  are in  place,  because generally  speaking,                                                               
systems that  have been around for  a long time like  fossil fuel                                                               
systems   are   relatively    inexpensive   relative   to   their                                                               
counterparts,  which are  new. The  measurable  adverse piece  is                                                               
that it is hard to put a new system into affect.                                                                                
MR. AUBIN replied  that it was difficult to  answer his question,                                                               
but 100  percent of the systems  they put in now  are fossil-fuel                                                               
fired. He didn't have a lot of firsthand knowledge about non-                                                                   
fossil fuel systems.  They have a less  measurable adverse affect                                                               
on  the environment  and that  is the  overall goal  of the  non-                                                               
fossil fuel fired systems.                                                                                                      
MR. PAWLOWSKI said  he felt it was important to  clarify that the                                                               
issue was  that they consider  the entire life-cycle cost  of the                                                               
investment in deciding which systems to go with.                                                                                
3:52:47 PM                                                                                                                    
MS.  SYDEMAN went  to Section  6  that started  out by  requiring                                                               
DOTPF  to establish  through regulation  a purchasing  preference                                                               
for  energy efficient  appliances, equipment  and vehicles.  That                                                               
language has been  pulled back somewhat to require  that when the                                                               
DOA enters into contracts to  purchase equipment that use energy,                                                               
it shall give substantial consideration  to the energy efficiency                                                               
of the equipment.  The original language referred  to energy star                                                               
appliances that are  used primarily in households  rather than in                                                               
commercial  and  business  settings,  such  as  State  of  Alaska                                                               
offices. Another  issue raised  is that  much of  the information                                                               
that is available  about appliances is not credible; a  lot of it                                                               
is  promotional   material  provided  by  the   makers  of  those                                                               
appliances.  They   wanted  some  caveat  to   use  credible  and                                                               
objective information,  not just  advertising. A third  issue was                                                               
that   there  are   approximately   7-9  purchasing   preferences                                                               
currently in state  statute and the DOA was  opposed to including                                                               
a new preference because purchasing is very complicated already.                                                                
3:55:04 PM                                                                                                                    
VERN   JONES,   Chief    Procurement   Officer,   Department   of                                                               
Administration  (DOA),  said he  also  oversees  the Division  of                                                               
General Services,  DOA, and  that Ms.  Sydeman was  correct about                                                               
the issues  they had with  the previous version.  They understand                                                               
what is  being attempted in the  current version, but he  had one                                                               
issue  with adding  the word  "substantial"  to consideration  of                                                               
energy  efficiency when  they consider  purchasing equipment  and                                                               
when credible objective  information is at hand.  He thought that                                                               
including  "substantial"  makes  this section  more  unclear  and                                                               
suggested  adding "compared  to cost  or estimated  life span  or                                                               
functionality.  But  he  suggested  that  deleting  "substantial"                                                               
would alleviate that concern.                                                                                                   
MS. SYDEMAN said  staff would defer on that issue  to the will of                                                               
the  committee  and to  Mr.  Jones'  20  years of  experience  in                                                               
purchasing with the state.                                                                                                      
3:57:35 PM                                                                                                                    
MR. PAWLOWSKI  said Section 7 used  to be Section 8  in version C                                                               
and regards the  renewable energy grant fund. The  CS deletes the                                                               
idea  that  the  Alaska  Energy  Authority  (AEA)  should  verify                                                               
matching  funds. The  ability to  verify matching  funds provided                                                               
some  problems  for  the  AEA,  but  the  sponsors  felt  it  was                                                               
important to  stick with the  principle of the section  of having                                                               
projects that have a financial  benefit to the state greater than                                                               
the amount of the grant funds received to go forward.                                                                           
3:58:25 PM                                                                                                                    
SARAH  FISHER-GOAD, Deputy  Director,  Operations, Alaska  Energy                                                               
Authority (AEA),  said she appreciated the  change. Their concern                                                               
is with verifying  the match at the time  of application, because                                                               
sometimes federal grant  funds are pending state  or other funds.                                                               
She stated that  the match requirements are verified  at the time                                                               
of the grant.                                                                                                                   
SENATOR  STEDMAN  went to  page  4,  lines  20-31, and  said  the                                                               
"average cost  of energy for  each resident" should maybe  have a                                                               
specific btu-equivalency, because it is  hard to compare the cost                                                               
of natural  gas in  Anchorage to  hydro in  Southeast or  oil out                                                               
West. He  also hoped the  projects using renewable  energy grants                                                               
would show a greater benefit than the cost of the grant.                                                                        
MS.  GOAD said  she could  get some  additional information  with                                                               
respect to determination of the  high cost areas. With respect to                                                               
the  addition on  lines 29-31,  she said  the AEA  already has  a                                                               
benefit  cost review  that is  significant  for their  evaluation                                                               
process. She pointed out that  they were not always talking about                                                               
construction  projects   where  a  benefit/cost   analysis  could                                                               
clearly  be  done.  A  study  may  have  a  public  benefit,  not                                                               
necessarily a financial benefit  and they evaluate other benefits                                                               
for a proposed project and application.                                                                                         
4:01:36 PM                                                                                                                    
SENATOR  STEDMAN said  it  appears from  the  numbers of  current                                                               
hydro projects moving forward in  Southeast that the cost per Kwh                                                               
may be  21-23 cents,  which is  substantially higher  than hydros                                                               
that were built several years ago,  but that is not too different                                                               
than what Fairbanks is faced with now at 23 cents Kwh.                                                                          
MS. GOAD  agreed that  having these  evaluation criteria  is very                                                               
difficult  for hydro  projects.  AEA's statutory  guidance is  to                                                               
give   most   weight   to  high-cost   areas   without   defining                                                               
"significant" for regional spreading,  for match requirements and                                                               
also  now   for  the  benefit/cost   evaluation.  So   they  have                                                               
established  regulations  that  provide a  systematic  method  to                                                               
evaluate projects even though there are a lot of moving parts.                                                                  
CO-CHAIR WIELECHOWSKI  said this is  tough to resolve  because of                                                               
residents in  rural Alaska paying  outrageous rates while  at the                                                               
same time urban residents have low cost energy.                                                                                 
SENATOR STEDMAN said the further they  move off of hydro and wind                                                               
into "it  might work at  one particular  spot on the  planet" the                                                               
more uncomfortable  he becomes.  The state  can't afford  to have                                                               
"upside-down projects."                                                                                                         
4:05:14 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI  noted that the bill  has separate sections                                                               
for different funds.                                                                                                            
SENATOR  STEDMAN  repeated  the  more they  deviate  from  proven                                                               
technology  the   more  uncomfortable  he  becomes   and  stated,                                                               
"There's enough good  projects; we don't have to go  out and roll                                                               
the dice."                                                                                                                      
SENATOR FRENCH  asked what  language is  pointing them  away from                                                               
proven  technologies.  This  language  says  "projects  that  are                                                               
likely to  have a financial  benefit that exceeds the  amounts of                                                               
grant funds received."                                                                                                          
SENATOR STEDMAN  said he  is fine  with the  language, but  he is                                                               
concerned about a  movement by some groups away from  it. He just                                                               
wanted them to be cautious.                                                                                                     
4:08:08 PM                                                                                                                    
MS.  GOAD said  the regulations  that were  adopted that  further                                                               
guide the renewable energy fund  recommendation program require a                                                               
project to  have reasonable environmental and  technical risk and                                                               
the proposed energy  system can reliably produce  and deliver the                                                               
energy as  planned or proposed  in an application. She  said they                                                               
would  be  providing  information to  the  Legislature  regarding                                                               
their round three grant recommendations  at the beginning of next                                                               
SENATOR  FRENCH  asked for  a  list  of  projects that  had  been                                                               
approved under this section, so he  could get a grip on what they                                                               
had spent money on so far.                                                                                                      
SENATOR WAGONER  said he  agreed with  Senator Stedman  that they                                                               
have to  be very careful  about how far  they go. "We've  got too                                                               
many rabbit trails to run down," he said.                                                                                       
CO-CHAIR  WIELECHOWSKI   said  any   guidance  members   have  on                                                               
adjusting the language to get to  where they are all headed would                                                               
be much appreciated.                                                                                                            
4:10:45 PM                                                                                                                    
MR.  PAWLOWSKI  said  Section  8  is  complimentary  language  to                                                               
Section  7. The  change  from the  previous Section  9  in the  C                                                               
version is  the deletion  of the specific  reference to  the word                                                               
"economist".  It   relates  to  the  independent,   economic  and                                                               
financial analysis of the renewable  energy fund grant projects -                                                               
to fulfill the intent in Section 7.                                                                                             
CO-CHAIR WIELECHOWSKI asked if Section  8 was designed to fix the                                                               
problem they were just talking about.                                                                                           
MR. PAWLOWSKI answered yes.                                                                                                     
SENATOR HUGGINS  said it made  him a little nervous  to designate                                                               
two organizations  that the Authority  can contract with  on page                                                               
6,   lines  16-17,   even  though   they  may   be  the   perfect                                                               
organizations, because it would be limiting what they could do.                                                                 
4:12:22 PM                                                                                                                    
MS.  SYDEMAN said  the  new Section  9  is the  same  as the  old                                                               
Section 10 with a few changes.  She explained this section has to                                                               
do with a  requirement that AEA work with  communities around the                                                               
state  to  establish a  statewide  fuel  buying cooperative.  The                                                               
objective is to  enable communities to buy fuel at  a lower price                                                               
than  what they  are currently  buying it  at when  they are  all                                                               
buying  separately   -  even   different  entities   within  each                                                               
community buy  fuel separately. They  don't achieve  economies of                                                               
scale. The  new language clarifies  that they are asking  the AEA                                                               
to facilitate the organization of  such a cooperative, not to run                                                               
it or  to even be a  part of it. This  is one of the  things they                                                               
heard  when  the committee  traveled  to  communities around  the                                                               
state. Entities are listed that  they thought might be interested                                                               
in  joining such  a co-op:  local governments,  utilities, school                                                               
districts,   tribal   governments,    state   agencies,   housing                                                               
authorities and other interested non-profit entities.                                                                           
She said  they might want  to further  look at whether  a village                                                               
store or other for-profit entity  could participate in the co-op.                                                               
Her  understanding  was  that  Article   9,  Section  6,  of  the                                                               
Constitution might place some limits  if credit is being extended                                                               
by to a  public authority like a local government.  It might make                                                               
it impossible  for for-profit entities  to participate in  a fuel                                                               
buying co-op. The  main intention here, though, is to  ask AEA to                                                               
contact  interested parties  to provide  technical assistance  to                                                               
them and help in the organization of such a cooperative.                                                                        
4:14:40 PM                                                                                                                    
SENATOR STEDMAN  said he  thought "other  interested non-profits"                                                               
language on page  5, line 19, was too broad,  although he said he                                                               
was  comfortable  targeting   local  governments,  utilities  and                                                               
schools,  the tribal  government and  state agencies.  He thought                                                               
those words should  be deleted and the sentence  should maybe end                                                               
with "housing authorities."                                                                                                     
SENATOR FRENCH asked for specific  non-profits that might fall in                                                               
this category that they might delete.                                                                                           
MS. SYDEMAN  said she put that  language in and she  was thinking                                                               
of public health or community health clinics.                                                                                   
CO-CHAIR WIELECHOWSKI  said they  could work on  some appropriate                                                               
language. He  wondered why they wouldn't  want to open it  up and                                                               
be more expansive rather than less expansive.                                                                                   
MS. GOAD responded that the  Authority is interested in providing                                                               
the  technical  assistance  that   would  be  necessary  to  help                                                               
communities and  entities form  a fuel  co-op, but  their efforts                                                               
might not  result in a statewide  fuel co-op. Right now  there is                                                               
no barrier for groups of  organizations to get together to become                                                               
a  fuel co-op.  Several years  ago they  changed their  bulk fuel                                                               
revolving  loan fund  statutes to  allow a  fuel co-op  to borrow                                                               
funds from the Bulk Fuel Revolving  Loan Fund for such a purpose,                                                               
but   except  for   utility  cooperatives   that  serve   several                                                               
communities, there hasn't  been any type of fuel  co-op that took                                                               
advantage of that change to their statutes.                                                                                     
She  said they  would  be  more than  willing  to  put an  effort                                                               
forward on  advertising and  providing technical  assistance. She                                                               
wasn't even sure that it would  help find economies of scale that                                                               
would reduce  the price in  rural communities.  Her understanding                                                               
is that the  cost of the fuel is really  the transportation. So a                                                               
community further up  a river would pay more than  one not as far                                                               
up.   Even  some   larger   utility   cooperatives  haven't   had                                                               
necessarily good  luck on buying  fuel in bulk and  delivering it                                                               
to several sites.                                                                                                               
SENATOR FRENCH  asked how  the fuel co-op  is envisioned  to work                                                               
and how  they actually work in  real life. It seems  like you buy                                                               
in bulk - sort  of the Wal-Mart approach to life -  if you put up                                                               
a big enough contract you get a break on the price.                                                                             
MS. GOAD  answered that when  they had  looked at changes  to the                                                               
Bulk Fuel  Revolving Loan  Fund, she  didn't know  who approached                                                               
them - maybe  someone in Northwest Alaska. She  didn't think they                                                               
developed a  cooperative. If  they did,  they didn't  borrow from                                                               
the Bulk Fuel Revolving Loan Fund.                                                                                              
She  said  five  communities  are   interested  in  combining  to                                                               
purchase fuel in  bulk. But the one that has  the least expensive                                                               
transportation  cost will  all of  a sudden  have higher  cost if                                                               
they are  getting a  levelized fuel price.  One community  may be                                                               
subsidizing  another community  if  they are  trying to  mitigate                                                               
that transportation cost.   Maybe a cluster  of communities would                                                               
make sense.                                                                                                                     
SENATOR STEDMAN asked if this could be done already.                                                                            
MS. GOAD  answered yes;  entities can  already come  together and                                                               
form a cooperative.                                                                                                             
SENATOR STEDMAN said  with that being the case, he  would want to                                                               
move to delete Section 9 [page 5, lines 15-19].                                                                                 
MS.  SYDEMAN added  one  of  the documents  they  looked at  when                                                               
writing this section was a  report by the Department of Community                                                               
and Regional  Affairs a number  of years ago  called "Cooperative                                                               
Purchasing:  A   Way  to   Save  When   Buying  Fuel   for  Rural                                                               
Communities."  She  noted again that the purpose  of this section                                                               
is to ask AEA to reach  out to communities and assess interest in                                                               
this.  While communities  can do  this  on their  own right  now,                                                               
staff had  received calls from  them saying they need  help doing                                                               
it - Ousinkie, for instance.                                                                                                    
4:23:58 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI  said he didn't  want to  advance something                                                               
that  wasn't needed.  If it  wasn't needed  they would  certainly                                                               
take it out.                                                                                                                    
MR. PAWLOWSKI went to Section  10, the Emerging Energy Technology                                                               
Fund, and said substantive changes  made to this section from the                                                               
C  version  was the  transference  from  the group  that  Senator                                                               
Huggins identified  on page  6, lines 16.  The Alaska  Center for                                                               
Energy and Power  was the original administrator  of the proposed                                                               
fund,  but  in  the  current  version it  is  the  Alaska  Energy                                                               
Authority. The  AEA is  authorized to  enter into  contracts with                                                               
the Center and the Institute  for Social and Economic Research to                                                               
do the socio-economic  and technical review of  the projects they                                                               
will be deciding with the Advisory Committee to fund or not.                                                                    
The  Advisory Committee  has been  expanded to  seven members  on                                                               
page 6,  line 25, through page  7, line 2. The  inclusion on page                                                               
6, lines 30  and 31, of the National  Renewable Energy Laboratory                                                               
and  Arctic  Energy  Office of  the  National  Energy  Technology                                                               
Laboratory  is because  they are  seen as  being helpful  because                                                               
they provide  buy-in from the  federal level and  offer expertise                                                               
not  necessarily available  in  the state.  But choosing  federal                                                               
agencies  to   be  appointed  by  the   governor  presented  some                                                               
problems, so  page 7, lines  6-12, were  added to provide  in the                                                               
case  of need  for a  contingency since  the state  cannot compel                                                               
federal service employees  to serve on boards  or commissions. If                                                               
these members  were not available  it provided a measure  for the                                                               
governor to make those appointments.                                                                                            
4:26:42 PM                                                                                                                    
SENATOR WAGONER had  a problem with requiring  degrees in science                                                               
or engineering to be a member  of the committee, because he could                                                               
think of  a lot  of people who  have had a  lot of  experience in                                                               
power  generation, alternative  energy sources  - geothermal  and                                                               
wind  energy,  and  they  would  miss a  lot  of  good  qualified                                                               
experienced Alaskans  with that  requirement. He  suggested after                                                               
"have a degree in science  or engineering" inserting "also or the                                                               
equivalent of  experience in  a related field  of energy"  so the                                                               
governor could "be a little creative in his selection."                                                                         
4:28:19 PM                                                                                                                    
MR. PAWLOWSKI  said Section 11  is a redraft of  the transferable                                                               
tax  credit section  that was  in version  C. In  looking at  the                                                               
original  program  working  with  Robynn  Wilson,  Department  of                                                               
Revenue  (DOR), the  idea  of a  transferable  credit posed  some                                                               
problems. He explained  that a transferable credit  by its nature                                                               
has to  go through several  entities. You  have a broker,  an end                                                               
purchaser; and  since the universe of  companies paying corporate                                                               
income  taxes  is  moderately  small in  this  state,  they  were                                                               
worried the  dollar being transferred  is the same dollar  to the                                                               
state either  direction. So,  if the policy  goal was  to deliver                                                               
and  incentivize private  spending in  renewable energy,  keeping                                                               
that directly to  the end person building the project  made a lot                                                               
more  sense than  having them  go out  on market  and shop  these                                                               
small  credits  around the  state  where  brokers and  purchasers                                                               
would  take percentages  off of  that value.  So, section  12 was                                                               
redrafted as a simple refundable tax credit.                                                                                    
He said  another major  departure from  the original  version was                                                               
that while  the credit  was available  at 15  percent of  the Kwh                                                               
charged, there  was a  floor and  a ceiling price  put on  of 2.1                                                               
cents  and 5  cents. Given  the varying  degree of  the price  of                                                               
electricity  around  the  state,  this really  didn't  make  much                                                               
sense.  So,  instead of  sticking  with  this floor  and  ceiling                                                               
approach they relied  on page 8, lines 29-31, where  the limit is                                                               
put on  the capital  expenditure - the  important caveat  to that                                                               
10-percent capital expenditure being on  line 31 going to page 9,                                                               
line 1. It says  a person may not receive a  credit for any state                                                               
or  federal grants  they  receive for  the  capital investment  -                                                               
making the refundable credit available  only for private dollars.                                                               
However,  since not  every member  of the  public is  a taxpaying                                                               
member, they  inserted on  page 8, lines  22-28, a  procedure for                                                               
the department  to get a  refundable credit to someone  who might                                                               
not be required to file an  income tax report. This is the reason                                                               
the bill  was modified in  the first  place to be  a transferable                                                               
tax credit - as a policy  goal. Making it a refundable tax credit                                                               
is  easier for  the  department to  administer  and delivers  the                                                               
maximum  benefit  of   any  subsidy  to  the   people  doing  the                                                               
He pointed out  on page 13, lines 21-22, Section  23 sunsets this                                                               
credit section.                                                                                                                 
SENATOR STEDMAN  said it seems  abstract because they  don't have                                                               
any  projects in  front of  them.  A lot  of hydros  can be  $100                                                               
million or  $350 million. What  kind of impact would  that credit                                                               
for these  projects make on the  treasury and would this  type of                                                               
tax credit  incentivize construction that would  not otherwise be                                                               
incentivized. "Show  me that it's not  a give-away - that  it's a                                                               
behavioral inducement to change the direction of somebody."                                                                     
MR. PAWLOWSKI said  that was a very appropriate  question, and he                                                               
said they  would work to bring  numbers back to the  committee on                                                               
it. In this section they were  interested in making sure that the                                                               
mechanics  work. The  actual financial  impact they  were leaving                                                               
for higher level decisions.                                                                                                     
SENATOR  STEDMAN  asked  how  much  they  are  talking  about  in                                                               
MR. PAWLOWSKI responded that the  15-percent rate is the mechanic                                                               
that  determines the  refundable credit  in any  given tax  year.                                                               
However, the overall aggregated credits  a person can claim under                                                               
this  section  is   limited  to  10  percent   of  their  capital                                                               
investment  -  the  sponsor's  intent  being  that  incentivizing                                                               
private  dollars  as  opposed  to grant  funds  is  important  in                                                               
encouraging investment in renewable  energy infrastructure in the                                                               
4:34:16 PM                                                                                                                    
The goal of  this section was to attract the  private dollars. So                                                               
the   fundamental  cap   is  10   percent  of   whatever  private                                                               
contributions are made to renewable energy projects.                                                                            
SENATOR  STEDMAN asked  if that  includes leveraged  or just  the                                                               
equity position.                                                                                                                
MR. PAWLOWSKI  replied that  his understanding  is that  it would                                                               
include leveraged positions.                                                                                                    
ROBYNN   WILSON,   Manager,   Corporate  Income   Tax   Division,                                                               
Department of  Revenue, added that  her reading of  this langauge                                                               
is that  when her  division is measuring  the 10  percent capital                                                               
investment,  that it  would  be excluding  any  state or  federal                                                               
grants. She  wasn't familiar  with the  state grant  program that                                                               
would  be relevant,  but if  she audited  this she  would try  to                                                               
ascertain whether a particular contribution  was a grant from the                                                               
state or not.                                                                                                                   
SENATOR STEDMAN asked, for example,  if they build a $300-million                                                               
hydro and he  goes out and borrows $200 million  and puts up $100                                                               
million, would  he get 10 percent  of $300 million or  10 percent                                                               
of $100 million.                                                                                                                
MS.  WILSON replied  that  she wasn't  certain  about the  intent                                                               
behind  the  word "grant."  She  could  see  money from  a  grant                                                               
program, but she didn't know the intent for subsidized interest.                                                                
SENATOR  STEDMAN  said  he  meant  that  they  wouldn't  use  any                                                               
financing conduit  from the state  - just  that the four  of them                                                               
would put up $25 million a piece  and then go out and borrow $200                                                               
million more. "Would the credit be $30 million or $10 million?"                                                                 
MS. WILSON  replied that  she couldn't speak  to intent,  but her                                                               
reading would be  that he would be responsible for  that debt, so                                                               
he would  get the benefit  of the  full amount. The  phrase about                                                               
"ex-state  or  federal  grant"  would  be  specifically  a  grant                                                               
SENATOR  STEDMAN said  a  lot  of energy  generation  try to  get                                                               
grants and federal help; but a  lot of them are financed directly                                                               
- for instance, the last hydro expansion in Juneau.                                                                             
4:37:45 PM                                                                                                                    
SENATOR FRENCH  questioned the dates  on page 8, lines  13-16, of                                                               
July 1, 2009 because this  probably wouldn't go into effect until                                                               
July 1, 2010.                                                                                                                   
MR.  PAWLOWSKI  explained that  these  dates  were left  in  this                                                               
version because  the committee actually  took action at  the time                                                               
to move the dates back to July  1, 2009 and the staff didn't feel                                                               
like they  should change  it. The sponsor's  intent was  to bring                                                               
those dates back up for committee reconsideration.                                                                              
SENATOR STEDMAN assured  them that when the bill pops  out of its                                                               
final version the dates would be in the future not in the past.                                                                 
MR.  PAWLOWSKI  added  that  Senator  Stedman's  point  was  very                                                               
appropriate and  something that he  would return to  the language                                                               
about to  exclude debt and  leverage from the calculation  of any                                                               
tax  benefit.  The sponsor's  intent  is  that  it should  be  on                                                               
CO-CHAIR WIELECHOWSKI  remarked that  Senator Stedman  raised the                                                               
point that  has been  consistently raised in  all the  tax credit                                                               
bills - that is how to  know this is really going to incentivize.                                                               
He asked  him to find  research or data  that could sort  of show                                                               
them that it works.                                                                                                             
4:39:48 PM                                                                                                                    
MS. SYDEMAN  went to Section 13  [page 9, lines 19-22]  which she                                                               
said is  new and  directs the  DOA to  work towards  developing a                                                               
standardized method of collecting  and storing energy consumption                                                               
and cost data  so progress on reducing energy  consumption can be                                                               
measured to  meet the goal  of 15 percent  by 2020. The  idea was                                                               
that state government would play a  role in that effort and would                                                               
lead  by  example.  Including  this  goal  would  be  meaningless                                                               
without a way to measure  progress. She said the departments have                                                               
reported that there  isn't an easy way to  measure statewide fuel                                                               
consumption. So they asked the DOA  to take six months to develop                                                               
a  unified  approach  across state  agencies  of  collecting  and                                                               
storing this data.                                                                                                              
4:41:05 PM                                                                                                                    
VERN   JONES,   Chief    Procurement   Officer,   Department   of                                                               
Administration (DOA), commented that the  DOA is probably not the                                                               
appropriate agency  to do this.  He explained that DOA  manages a                                                               
total  of 15  facilities;  DOTPF probably  manages  in excess  of                                                               
1000; it is  also the agency that manages  the energy performance                                                               
contracts  that they  enjoy savings  from. Other  candidates like                                                               
AEA  whose core  business  is  energy related  or  the Office  of                                                               
Management and Budget would be  a better choice to coordinate and                                                               
collect that data. They have the  same issue with Section 24 that                                                               
seems to go along with Section 13.                                                                                              
MS. SYDEMAN clarified  that the reason they selected  the DOA for                                                               
this role is that they really  thought how agencies keep track of                                                               
their  energy  expenditures was  an  accounting  issue; it's  not                                                               
related  completely  to  management  of  public  facilities,  but                                                               
really to any energy expenditure.                                                                                               
4:42:56 PM                                                                                                                    
MR. JONES said he hesitated to  speak for the Division of Finance                                                               
which  controls   their  accounting   system,  but   his  limited                                                               
knowledge tells  him that  many of these  agencies don't  use the                                                               
state  accounting system  and would  probably have  difficulty in                                                               
capturing the data and reporting out  on it. So he maintained the                                                               
DOA  is still  not the  appropriate agency  to do  something like                                                               
4:43:52 PM                                                                                                                    
SENATOR STEDMAN  said getting the data  is a good intent,  but he                                                               
has trouble even  finding how many state employees  the state has                                                               
or how  many automobiles  are on the  Alaska Marine  Highway that                                                               
are nonrevenue.  They have trouble getting  basic information and                                                               
getting  this information  was beyond  that. His  expectations of                                                               
the department being able to  do something like this weren't very                                                               
high  without  a  considerable  expense for  setting  it  up  and                                                               
running it.                                                                                                                     
CO-CHAIR  WIELECHOWSKI  directed staff  to  work  with DOA,  AEA,                                                               
DOTPF, and OMB to see who is best appropriate to do this task.                                                                  
MS.  SYDEMAN  went  to  Section  14 that  directs  the  DOTPF  to                                                               
consider energy  efficiency when purchasing new  vehicles for the                                                               
state fleet. She believed they  were already doing this, but this                                                               
bill requires it in statute.                                                                                                    
4:45:31 PM                                                                                                                    
MARY SIROKY,  Special Assistant  to the  Commissioner, Department                                                               
of  Transportation  and  Public   Facilities  (DOTPF),  said  the                                                               
department had no problems with  that language, and considers the                                                               
phrase "where  practicable" gives them the  necessary flexibility                                                               
to be able to do this.                                                                                                          
4:46:20 PM                                                                                                                    
MS. SYDEMAN said Section 15  makes substantial changes to the old                                                               
Section  16 in  version C  which required  DOTPF to  retrofit all                                                               
public  facilities  if  retrofitting  them would  result  in  net                                                               
energy savings to the state  within 15 years. The department said                                                               
it was  too ambitious  of a  goal and that  made sense.  So, this                                                               
version  requires DOTPF  to  retrofit 25  percent  of all  public                                                               
buildings  by 2020  starting  with those  that  are least  energy                                                               
efficient  and  this  requirement  is subject  to  funding  being                                                               
available.  This  version  also   requires  DOTPF  to  develop  a                                                               
systematic  process for  determining  which  buildings should  be                                                               
upgraded to reduce  long-term energy costs and  it requires DOTPF                                                               
to submit a  report to the Legislature after  consulting with the                                                               
DOA detailing the department's progress in meeting this mandate.                                                                
They  also  have  put  a  less-expansive  definition  of  "public                                                               
facility" in at  the department's request. They  are only looking                                                               
at  facilities  that  are  larger   than  10,000  sq.  ft.  which                                                               
certainly narrows  the universe  of public facilities.  They have                                                               
also excluded facilities that belong  to the Legislature or Court                                                               
System  because  there was  concern  about  the executive  branch                                                               
being  able to  corral other  branches of  government. They  have                                                               
also explicitly excluded facilities that  are leased to the state                                                               
over  which they  have no  control and  in which  they would  not                                                               
invest state funds.                                                                                                             
SENATOR WAGONER said it doesn't  matter which department or which                                                               
branch of government  owns the building, it's still  owned by the                                                               
state.  If the  DOTPF was  going  to do  this work,  he wanted  a                                                               
report from them as to  what their administrative overhead charge                                                               
would be  to see if  it wouldn't be better  to go out  to private                                                               
engineering companies.                                                                                                          
MR. ST.  AUBIN responded that he  would have to work  on a fiscal                                                               
note  for  this,  but DOTPF's  public  facilities'  overhead,  in                                                               
general, runs lower than the highway section's.                                                                                 
CO-CHAIR WIELECHOWSKI said that would be helpful.                                                                               
SENATOR  FRENCH  asked  how  many  public  facilities  owned  and                                                               
controlled  by the  state  would fall  under  this definition  of                                                               
10,000 sq. ft.                                                                                                                  
MR.  ST.  AUBIN replied  that  a  quick  look  came up  with  190                                                               
SENATOR STEDMAN  asked him to  elaborate on the age  and location                                                               
of these buildings. He emphasized  that this is broader than just                                                               
DOTPF and he  was not excited about DOTPF  creating a bureaucracy                                                               
to  do  this   versus  sourcing  it  out.  He   wanted  DOTPF  to                                                               
concentrate  on building  new roads  and maintaining  the state's                                                               
MR.  ST. AUBIN  said  the  locations of  the  buildings are  from                                                               
Ketchikan to Kotzebue  and age will vary from built  last year to                                                               
being over 50 years old.                                                                                                        
SENATOR STEDMAN said he wanted a spreadsheet on that data.                                                                      
MR. ST. AUBIN said he could do that.                                                                                            
MS. SYDEMAN said she didn't know  if everyone was making the same                                                               
assumption  they made  in this  section,  but much  of this  work                                                               
would likely be done through  performance contracting, not by the                                                               
department. She also noted that  the Governor has a bill creating                                                               
a  fund that  would take  about $18  million in  federal stimulus                                                               
funds and  use that  to leverage  up to $250  million that  he is                                                               
requesting permission  to issue as  bonds. Sixty percent  of that                                                               
money would  be available for retrofitting  public facilities. So                                                               
they wouldn't  include a  section like  this unless  they thought                                                               
there was a  good possibility of funding being  available for it.                                                               
The two are very closely linked.                                                                                                
4:52:30 PM                                                                                                                    
MS. SYDEMAN  said Section 16 simply  tasks the AEA and  AHFC with                                                               
working together to annually plan  and conduct a public education                                                               
campaign to  promote energy efficiency and  conservation. AEA has                                                               
already begun a  public education effort; so  this requirement is                                                               
consistent  with  their  intent.  They were  told  by  the  legal                                                               
drafters,  however,  that  they  don't  have  explicit  statutory                                                               
authority  for  that  right  now.  This  language  provides  that                                                               
authority.  She   noted  that   other  jurisdictions   that  have                                                               
implemented  campaigns to  reduce  energy  consumption have  seen                                                               
significant  benefits.  The  Anchorage School  District  recently                                                               
completed  a  pilot  program  to  reduce  energy  costs  in  nine                                                               
Anchorage schools  and documented a substantial  reduction in use                                                               
of both natural gas and electricity.                                                                                            
4:53:39 PM                                                                                                                    
MR.  PAWLOWSKI said  Sections 17-20  together  resurrect the  old                                                               
alternative  energy  revolving loan  fund  in  the Department  of                                                               
Commerce. It's a  reauthorization and there were  no changes from                                                               
the C version.                                                                                                                  
4:54:08 PM                                                                                                                    
GREG WINEGAR,  Director, Division  of Investments,  Department of                                                               
Commerce, Community  and Economic Development  (DCCED), explained                                                               
that this fund  was created in 1987 and operated  for nine years;                                                               
it made close to 3000 loans  and was funded with $18 million. The                                                               
Legislature started  taking money  out of it  in 1987  and passed                                                               
language which basically  said as funds came in  from loans those                                                               
funds  reverted  back   to  the  general  fund.   This  piece  of                                                               
legislation would  remove that  language and  allow this  fund to                                                               
operate if a funding source were discovered for it.                                                                             
MR.  PAWLOWSKI  said  they  asked the  department  to  run  three                                                               
scenarios  based on  different  funding levels  and this  program                                                               
theoretically was a net positive to the state over its lifetime.                                                                
SENATOR WAGONER asked on page 12,  line 23, if the "8 percent and                                                               
may  not  be less  than  5  percent  a  year" interest  rate  was                                                               
reasonable at this time.                                                                                                        
MR. PAWLOWSKI deferred that answer to Mr. Winegar.                                                                              
4:56:24 PM                                                                                                                    
MR. WINEGAR responded that that  was a good question. Essentially                                                               
when this  program operated in  the 80s  the interest rate  was 5                                                               
percent  for  the  first  $15,000 borrowed  and  15  percent  for                                                               
anything borrowed  in the $15,000-$30,000 range.  The program did                                                               
operate successfully; it was funded  with $18 million and most of                                                               
the loans went out at 5  percent. The average loan was around $8-                                                               
9000. About $24 million came out  of the fund over that nine-year                                                               
period. It  actually cash  flowed at  a 5-percent  interest rate.                                                               
The idea here  was to provide as  low a rate as  possible, but at                                                               
the same time have it be  a successful program over time. That is                                                               
where the 5-8 percent range came in, but that could be adjusted.                                                                
SENATOR  WAGONER asked  if higher  risk projects  would have  the                                                               
higher interest rate.                                                                                                           
MR.  WINEGAR  answered that  essentially  their  decision is  not                                                               
based on risk, but on what rates  do in the market which would be                                                               
prime-plus 1 with a floor of 5 percent.                                                                                         
SENATOR FRENCH  said it sounds  like they were  encouraging small                                                               
loans so  that they  could limit  the state's  risk in  any given                                                               
investment in what was then alternative energy.                                                                                 
MR. WINEGAR replied that he thought  that was the thinking in the                                                               
4:58:21 PM                                                                                                                    
MR. PAWLOWSKI  said he didn't have  his notes on Sections  21 and                                                               
22,  but  Section  23  is the  renewable  energy  refundable  tax                                                               
CO-CHAIR WIELECHOWSKI asked what Sections 21 and 22 repealed.                                                                   
4:59:04 PM                                                                                                                    
BRIAN  KANE, Legislative  Counsel, Legislative  Affairs, said  he                                                               
thought  they were  related to  repealing the  Alternative Energy                                                               
Loan Program so that new language would make sense.                                                                             
MR.  PAWLOWSKI   said  Section  15   was  the   retrofits  energy                                                               
efficiency  and  energy  reports  section  to  conform  with  the                                                               
purposes in Section 1.                                                                                                          
CO-CHAIR WIELECHOWSKI  said Section  23 was the  renewable energy                                                               
5:00:27 PM                                                                                                                    
MS. SYDEMAN  said Section 25  is new  and adds to  uncodified law                                                               
the  requirement for  DOTPF to  develop a  systematic process  of                                                               
prioritizing the retrofitting of  state facilities. That would be                                                               
part  of the  mandate to  retrofit. Section  26 is  also new  and                                                               
directs the  Governor to  submit a report  to the  Legislature by                                                               
November  1, 2010,  with recommendations  about how  to structure                                                               
state  energy program  and offices  to increase  coordination and                                                               
operating  efficiencies. She  thought members  were aware  of the                                                               
fact the House  has a bill to restructure  energy programs within                                                               
the  state and  they are  simply asking  the Governor  to provide                                                               
recommendations by next  year to have the benefit  of thinking of                                                               
the executive branch.                                                                                                           
5:01:56 PM                                                                                                                    
CO-CHAIR WIELECHOWSKI  thanked staff  and the  administration for                                                               
all of their work and input;  he said they would continue to work                                                               
on SB 220 and adjourned the meeting at 5:01 p.m.                                                                                

Document Name Date/Time Subjects
SB 220 version K.pdf SRES 2/15/2010 3:30:00 PM
SRES 2/18/2010 3:30:00 PM
SRES 2/22/2010 3:30:00 PM
SRES 2/24/2010 3:30:00 PM
SB 220