Legislature(2007 - 2008)HOUSE FINANCE 519
03/12/2008 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB357 | |
| HB338 | |
| HB414 | |
| HB356 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 338 | TELECONFERENCED | |
| + | HB 356 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 357 | TELECONFERENCED | |
| += | HB 414 | TELECONFERENCED | |
HOUSE BILL NO. 338
An Act relating to the power project fund and the bulk
fuel revolving loan fund; authorizing the Alaska Energy
Authority to borrow money from the power project fund
for the bulk fuel revolving loan fund and to repay
money borrowed; and providing for an effective date.
Vice-Chair Stoltze MOVED to ADOPT work draft 25-LS1332\E,
Kane, 2/22/08, as the version of the bill before the
Committee. There being NO OBJECTION, it was adopted.
2:10:42 PM
REPRESENTATIVE MARY NELSON, SPONSOR, explained that the bill
would allow the Alaska Energy Authority (AEA) to borrow from
the Power Project Fund (PPF) for use in the Bulk Fuel
Revolving Loan Fund (BFRLF). The PPF has a balance of $10.8
million. Due to the ever-increasing cost of energy
throughout the state, especially in remote rural villages,
the ability of AEA to offer loans has been hindered because
larger loans are required to buy the same quantity of fuel.
Representative Nelson said that Rural Alaska Fuel Services
is often asked to provide loans to communities that would
otherwise be unable to get loans. The payback rate is 100%.
Although the bridge loan program has been functioning well
since 2004, HB 338 is necessary because there is no
statutory authorization for AEA to operate the program.
Communities have struggled to purchase bulk fuel because of
significant decreases in or total elimination of municipal
assistance and revenue sharing. The loans help communities
purchase fuel at the beginning of the cold season. The
fiscal note is small and for contractual services. The
Department of Commerce, Community and Economic Development
is optimistic that the demand for the program will fall with
the reinstatement of state revenue sharing (Statement on
File).
2:14:52 PM
Co-Chair Meyer opened public testimony.
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT (DCCED), said the BFRLF provides a
financing source for communities of 2,000 or less to
purchase an annual supply of fuel. She said AEA only commits
to loans based on cash available. The bill provides a
backstop source of funds to allow AEA to better meet the
needs of borrowers. There is an intense demand and repayment
cycle. The bill limits the lending ability by restricting
the amount based on the June 30 cash balance for the PPF, to
$2 million or 10% of the available cash balance. The current
cash balance of the PPF is approximately $10.8 million,
limiting loans to approximately $1 million. If the balance
goes below $5 million, the BFRLF would be suspended
(Statement on File).
Representative Thomas asked if AEA can garnish a community's
revenue sharing if that community has outstanding debt. Ms.
Fisher-Goad answered that although AEA has the ability to
collateralize the loans and request payments, a community
would not eligible for a new loan until the balance was paid
off.
Representative Thomas pointed out that the history sheet
(Copy on File) shows several communities with three or four
years of unpaid balance.
Representative Kelly asked if the interest rate changed over
time. Ms. Fisher-Goad replied that the first time an entity
borrows the interest rate is zero percent. The rate then
changes to the municipal rate of approximately 4.5%.
CHRIS ANDERSON, DEPUTY DIRECTOR OF CREDIT, ALASKA ENERGY
AUTHORITY, added that delinquencies are averaging less than
3% and tend to be seasonal.
2:22:25 PM
DEL CONRAD, CEO, RURAL ALASKA FUEL SERVICES, has been
managing the Bulk Fuel Bridge Loan Program on behalf of
DCCED since its inception. The bridge loan program was set
up with a $500,000 grant from the Denali Commission in 2004
when the first price shock hit rural Alaska. A significant
number of communities had been turned down for loans by AEA.
The Denali Commission made a grant to the State. The State,
in conjunction with the Alaska Village Electrical
Cooperative (AVEC) and Rural Alaska Fuel Services (RAFS),
set up a loan program which has been run by RAFS.
Mr. Conrad explained that in order to be eligible, a
community or borrowing entity has to be turned down by AEA.
This could happen for a variety of reasons, such as an
outstanding debt or an IRS lien. At that point the entity
becomes eligible for the bridge loan program. If the
community repays on a timely basis, they can get the loan
for another two years at zero percent interest. The goal is
to help high risk, financially unsustainable communities
move back into the regular borrowing process. About $6.5
million has been loaned over the past four years.
2:27:38 PM
Representative Kelly asked if Mr. Conrad functions primarily
as a banker in relation to the program. Mr. Conrad answered
that related to the fuel provision, he is primarily a
banker. Related to the bridge loan, he is part banker and
part consultant. He meets with community administrators and
helps them sort through costs. The largest issue is
typically that a community will keep prices too low and not
enforce collections in an attempt to help its residents.
Representative Kelly asked if the responsibility stays with
the utility. Mr. Conrad said yes, but added that he assists
the community in problem-solving.
PUBLIC TESTIMONY CLOSED.
Vice-Chair Stoltze MOVED to report CS HB 338 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CS HB 338 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with attached new zero fiscal note
by the Department of Commerce, Community and Economic
Development and new fiscal note by the Department of
Commerce, Community and Economic Development.
2:31:33 PM
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