Legislature(2009 - 2010)BARNES 124
02/09/2010 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Overview(s) on Home Energy Rebate Program & Low Income Home Weatherization Program. | |
| HB296 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 296 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 296-ENERGY EFFICIENCY BONDS; LOANS; FUND
[Contains discussion of HB 305]
4:23:11 PM
CO-CHAIR EDGMON announced the next order of business would be HOUSE
BILL NO. 296, "An Act authorizing and relating to the issuance of
bonds by the Alaska Housing Finance Corporation; establishing the
Alaska energy efficiency revolving loan fund and relating to the fund;
authorizing municipalities and the State of Alaska to borrow money
from the Alaska Housing Finance Corporation for the purposes of the
Alaska energy efficiency revolving loan fund; and providing for an
effective date."
4:23:34 PM
DAN FAUSKE, CEO/Executive Director, Alaska Housing Finance Corporation
(AHFC), Department of Revenue (DOR), informed the committee HB 296 is
an act authorizing and relating to the issuance of bonds by AHFC to
establish an Alaska energy efficiency revolving fund. He noted that
the bill was a result of discussions with the administration, the
Department of Transportation & Public Facilities (DOT&PF), and two
agencies of the Department of Commerce, Community, & Economic
Development (DCCED), the Alaska Industrial Development & Export
Authority (AIDEA) and the Alaska Energy Authority (AEA). The agencies
met to discuss how to deal with the $28.3 million received from the
American Recovery and Reinvestment Act of 2009 (ARRA) for the state
energy program. Of that, $18 million is going to state facilities
through DOT&PF and AHFC, and the bill would leverage this money
through performance based contracting to $250 million. Mr. Fauske
noted that DOT&PF has utilized this process previously. He explained
that contractors assess and guarantee that the energy savings
resulting from the retro-fit of public buildings would pay for the
debt service on the bonds. Thus, the contractors are "on the hook" to
meet that standard. Basically, general fund monies that are currently
paying for utilities are saved and put towards paying the loan.
Alaska Housing Finance Corporation's position is that spending $18
million is not as effective as leveraging the funds. He noted that
the state owns many facilities and leveraging the funds would create a
revolving loan fund so the money will continue to be loaned out as the
debt is paid. Mr. Fauske compared the bill to the use of the tobacco
settlement money; rather than an annual increment, the money was
secured by bonds that are paying off very well. Under this bill, the
bonds would be AHFC general obligation bonds and the paying agencies
would be the state agencies utilizing the program, in a manner similar
to the purchase of the Atwood Building, and the loans to the
University of Alaska (UA) to build dorms.
4:27:31 PM
REPRESENTATIVE TUCK asked whether performance based contracting was
part of the former revolving loan program.
4:27:56 PM
MR. FAUSKE said no.
4:28:08 PM
REPRESENTATIVE TUCK asked who would determine the contractor on state
projects.
4:28:21 PM
MR. FAUSKE responded DOT&PF and the school districts would decide.
4:28:43 PM
MR. BUTCHER clarified that AHFC would administer the program. In
addition, because the bill would create a revolving loan fund and
funds would remain available in perpetuity as the loans are repaid,
there is not a question of whether funds would be available for future
projects. Furthermore, AHFC is comfortable that DOT&PF would work
with the other departments that own buildings to establish a
prioritized list of public buildings that are ready to have work done
now. AHFC would determine a list of priorities for school district
and municipal projects.
4:30:18 PM
CO-CHAIR EDGMON mentioned another provision of HB 305 that requires
AEA to establish an energy index database and that further revises
current law regarding energy audits. He asked whether the energy
standards required by HB 305 would make the program established by HB
296 more effective.
4:31:05 PM
MR. BUTCHER relayed that representatives from affected departments
advised that gathering the information needed to create an energy
index would cost "in the millions." Furthermore, as the program
established by HB 296 evolves, this information would be gathered by
energy auditors during the process. Also, he was told by
representatives at DOT&PF that they are already aware of the priority
order of buildings with energy efficiency needs.
4:32:16 PM
CO-CHAIR EDGMON asked whether the different agencies working with
DOT&PF have different standards.
MR. BUTCHER clarified that the agencies have the same standards;
however, there is the question of whether to develop an index at a
high cost, before any work is done.
CO-CHAIR EDGMON observed that one of the goals of the energy policy
bill is to increase the overall efficiency levels by 15 percent
between 2010 and 2020. He asked what impact this bill would have on
the approximately 700 state buildings administered by DOT&PF.
4:34:01 PM
MR. BUTCHER stated that a portion of the appropriation to the state
energy program (SEP) is being used to determine a benchmark for
improving energy efficiency on the "residential side." Regarding
public facilities, he deferred the question to DOT&PF or the
Department of Administration (DOA).
4:34:39 PM
JACK KRIENHEDER, Chief Policy Analyst, Office of the Director, Office
of Management & Budget (OMB), Office of the Governor, informed the
committee HB 296 is a continuation of a program DOT&PF has in place.
He offered to provide information from DOT&PF on 16 state buildings
that have had performance contract energy upgrades. This data would
reveal the energy savings per building. Mr. Krienheder told the
history of the DOT&PF program. In response to Representative Tuck, he
said that historically, the energy performance contract firm does the
initial audit and provides a report of the recommended work. For the
ongoing DOT&PF program, the energy performance contractor was Siemens
Energy. The energy performance contractor then collects bids from
local subcontractors to do the work similar to deferred maintenance
contracts that use local hire.
4:38:48 PM
REPRESENTATIVE TUCK surmised that Siemens Energy is a professional
auditor for commercial facilities that would oversee the work.
4:39:07 PM
MR. KRIENHEDER said correct. He added that Siemens Energy would do
the audit, submit a proposal, guarantee the savings, and monitor the
project after, to make sure that the projected energy savings are
being realized.
4:39:30 PM
REPRESENTATIVE JOHANSEN asked for further information about the DOT&PF
program.
4:39:56 PM
MR. KRIENHEDER relayed that the program was modeled after a similar
energy savings program in Washington. The first energy performance
contract was signed 4 to 5 years ago, and about 16 buildings have been
improved since then. In further response to Representative Johansen,
he advised that the performance contractor does an initial energy
audit and predicts the savings over a certain payback period. The
financing aspect can be handled in different ways. The work done
includes new lighting, upgrades to heating controls, improvements to
insulation, and general projects to reduce the energy use of the
building. He pointed out that for these projects DOT&PF has been
borrowing money from DOR, or through the contractor; HB 296 proposes
to use AHFC bonds instead, in order to get a lower interest rate and
to simplify the process. Furthermore, the energy savings pay for the
loan payments until the loan is paid off, and then the full savings
begin to accrue to the state.
4:44:19 PM
CO-CHAIR MILLETT asked whether the performance standards are being met
and whether there are savings.
4:44:44 PM
MR. KRIENHEDER said yes. The savings are guaranteed by the
performance contractor; thus if the targets are not met the contractor
must pay the state. In fact, the savings targets have been met and
exceeded. The contractor's guarantee is on the quantity of energy
saved, but the dollar savings fluctuates with the cost of energy. He
offered to provide information from DOT&PF on the actual savings.
4:46:32 PM
REPRESENTATIVE JOHANSEN observed the zero fiscal note is incorrect.
4:46:47 PM
MR. BUTCHER assumed that after the loan is paid off the savings would
go to the department, thus the fiscal note should be indeterminate.
4:47:32 PM
MR. KRIENHEDER clarified that the intent of the fiscal note was to
address the cost to DOT&PF of performing this program. Personnel
would be hired for the management of the performance contracts;
however, these positions would be paid for from the federal ARRA
funds. Regarding energy savings, the amount is too speculative to be
determined.
4:48:41 PM
REPRESENTATIVE TUCK asked whether the energy savings goes directly
back to the revolving loan fund. Further, he asked if there is
interest or other benefits paid to AHFC.
4:49:34 PM
MR. BUTCHER responded that AHFC is not going to operate at a deficit,
but the cost of the loan has not been determined. There would be some
interest charged at a low rate.
REPRESENTATIVE TUCK asked for the meaning of "sovereign immunity
defense."
4:50:32 PM
MR. KRIENHEDER understood that language is needed to secure the loan
from AHFC.
4:50:54 PM
REPRESENTATIVE TUCK then asked whether AHFC would verify the proposal,
and how performance contractors are "on the hook."
4:51:49 PM
MR. BUTCHER expressed his belief that the energy department at AHFC
would look at the contract. Regarding energy performance contracts,
other states have had success making the energy savings part of the
contract. In most cases, if the energy savings exceeds the estimate,
the excess goes to the contractor; however, this aspect is not part of
the DOT&PF contracts.
4:52:56 PM
MR. KRIENHEDER added that performance contractors are on the hook
financially because they have to provide a bond.
4:53:23 PM
REPRESENTATIVE TUCK surmised that it is in the municipality's or
school district's best interest to get bids from more than one
contractor in order to get accurate numbers. He then asked whether in
the case of higher savings, the loan would be paid off quicker, or if
the additional savings would benefit the municipality.
4:54:37 PM
MR. KRIENHEDER explained that contracts have varying terms; in fact,
some do provide for shared savings to be split. He understood that
DOT&PF's contract with Siemens Energy did not have a shared savings
arrangement and additional savings would go to the state. He said he
would confirm whether the loan terms were fixed and the loan payment
amount would stay the same; however, in the recent past, the
additional savings were used to avoid higher costs due to the spike in
oil prices.
4:57:46 PM
[HB 296 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 296 SEP bonds Sponsor Statement.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |
| Energy Savings Performance Contracting Summary-DOT.pdf |
HENE 2/9/2010 3:00:00 PM |
|
| ARRA Energy funds, SEP plan.pdf |
HENE 2/9/2010 3:00:00 PM |
|
| HB0296-1-1-011910-REV-N.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |
| HB0296-2-1-011910-DOT-N.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |
| Agenda 02092010.PDF |
HENE 2/9/2010 3:00:00 PM |
|
| House Energy AHFC powerpoint.ppt |
HENE 2/9/2010 3:00:00 PM |
|
| AM#1 HB296.pdf |
HENE 2/9/2010 3:00:00 PM |
HB 296 |
| AM#2 HB296.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |