Legislature(2007 - 2008)HOUSE FINANCE 519
04/03/2008 08:30 AM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB289 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 289 | TELECONFERENCED | |
| + | SB 303 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 366 | TELECONFERENCED | |
SENATE BILL NO. 289
"An Act relating to home energy conservation and
weatherization for purposes of certain programs of the
Alaska Housing and Finance Corporation."
JOHN WEISE, STAFF, SENATOR LYMAN HOFFMAN (SPONSOR),
testified in support of the legislation and provided a
PowerPoint presentation, "SB 289 Home Energy" (Copy on
File.)
Mr. Weise referred to Page 2, Slide 1, "Housing Assessment
Survey 2005":
· Estimated Housing Stock 2005 - 278,118
· % older housing (21+ yrs) increasing
· % new housing (0-10 yrs) decreasing
· Households income eligible for weatherization services
- 45,000
· Households report being drafty - 45%
Mr. Weise pointed out that the percentage of older housing
is increasing while the percentage of newer homes is
decreasing. The sponsor's intent is to help with high energy
costs for the tens of thousands of homes across Alaska that
need assistance.
Mr. Weise reviewed Page 3, Slide 2, "Home Energy":
· Responsive to Alaskans being impacted by high energy
costs
· Updates and expands the home energy efficiency and
weatherization programs in the AHFC
Mr. Weise reported that the sponsor met with the Alaska
Housing Finance Corporation (AHFC) to discuss solutions
aimed at helping occupants who are suffering the most.
Senate Bill 289 updates and expands two of AHFC's current
energy conservation and weatherization programs.
8:46:27 AM
Mr. Weise discussed Page 4, Slide 3, "Weatherization":
· Focus on energy-efficient improvements
· Direct the available funding to items that will save
the most energy
· Typical improvements include air sealing, insulating
and improved heater efficiencies
Mr. Weise observed that the bill focuses primarily on energy
efficient improvements and directs funding to those items
that would save the most energy. Typical improvements
include air sealing, insulating, and upgrading heater
efficiencies involving water heaters, furnaces, or boilers.
Mr. Weise referenced Page 5, Slide 4, "Energy Efficiency and
Weatherization Program":
· Eligibility for home energy efficiency programs
extended from 60% to 100% median income.
· Low income Alaskans will continue to receive the
priority focus of the program
Mr. Weise pointed out that the existing weatherization
program aids Alaskans at the 60 percent median income level
or lower. He proposed raising the eligibility for assistance
to 100 percent median income while continuing to give
priority to Alaskans in the lowest income groups. This
extension would create a broader range of income qualifying
households approaching the "tens of thousands" number
demonstrated earlier. The expansion would allow services to
support more Alaskans impacted by high energy costs.
Mr. Weise detailed Page 6, Slide 5, "Median Income
Guidelines":
Family 60% 100%
Size Median Median
1 $23,887 $39,812
2 $31,236 $52,060
3 $38,586 $64,310
4 $45,936 $76,560
5 $53,286 $88,810
Each add'l person - 60% $1378 and 100% $2296
Mr. Weise observed that a family of one would go from
roughly $24,000 at 60 percent median to almost $40,000 at
100 percent median. A family of four would go from $46,000
to almost $77,000 in income.
8:47:52 AM
Mr. Weise elaborated on the impact of proposing $300 million
for weatherization programs statewide on Page 7, Slide 6,
"SB 289 Impact":
Past $4.8 600 1700
Years million households people
(1.8m
federal
$3m
AHFC)
Current With $48 4167 11,800
program million households people
Expanded $200 17,400 49,000
Program million
Adjust
to 100%
median
income
Mr. Weise went on that in past years, AHFC spent $4.8
million per year ($1.8 million federal sources and $3
million from AHFC sources) to help 600 households or 1700
people a year. Mr. Weiss acknowledged that all Alaskans are
struggling with high energy costs but reiterated that the
intention behind SB 289 is to make certain that Alaskans
suffering the most at the lowest income levels are receiving
help first. Under the existing program at the 60 percent
median income level with funding jumping up to $48 million,
help would be distributed to little more than 4000
households or 12,000 people falling substantially short of
the tens of thousands requiring assistance. By comparison,
expanding the program to 100 percent median income and
allotting $200 million to this qualifier, AHFC projects
could potentially assist more than 17,000 households or
50,000 people.
8:49:25 AM
Mr. Weise set forth that the Home Energy Rating Rebate
Program portion of the bill stresses the importance of
targeting Alaskans who through unfortunate circumstances are
living in hard to heat dwellings. Unlike the previous plan,
this AHFC program is not dependent on income level. Houses
in Alaska are divided into energy ratings from one to five
stars. The sponsor intends to allocate $100 million towards
those Alaskans living in residences with the lowest star
ratings and provide incentive to increase home energy
efficiency. Homeowners would need an "As-is" and a post
energy rating assessment. The rebate would be in a step-
approach as energy star ratings increase; $2500 awarded for
the first increase in a star rating and $500 for each
additional star rating on up to a total of $5,000. Half
steps are included.
Mr. Weise recounted Page 9, Slide 8, "Increase Energy Star
Ratings of Home":
· 1-step increase, $2500
· 2-steps, $3000
· 3-steps, $3500
· 4-steps, $4000
· 5 or more steps $5000
Mr. Weise alleged that the amount of money needed to replace
an inefficient boiler and gain the efficiencies would cost
somewhere between $5,000-$10,000 dollars.
8:50:39 AM
Mr. Weise read Page 10, Slide 9, "Home Energy Rating Rebate
Program":
· Expected 30% reduction in home energy costs
· Up to $5,000 rebate
· State cost - $100 million
· Homeowner investment - est $175 million
Mr. Weise testified that in a past evaluation of the rebate
program, AHFC found that on average energy costs were
reduced by 30 percent and in some cases as high as 70
percent. The cost or investment to the State would be $100
million. In addition, Alaskan homeowner investment through
self-financing or procuring a loan would be upwards of $175
million.
Mr. Weise summarized that SB 289 creates an improved and
more flexible process to allow AHFC to respond to rising
fuel costs across the state. Senate Bill 289 broadens AHFC's
scope of influence by helping the organization to reach more
Alaskans.
8:52:19 AM
Mr. Weise noted legal response regarding the removal of
references to two private entities, Alaska Craftsman Home
Program and Energy Rated Homes of Alaska. He also impressed
upon the committee the three categories inserted on Page 3
of the bill: the home energy loan program, rural capital
retrofit program, and energy efficiency and weatherization
program. The latter primarily targets weatherization
activities from the $300 million proposed in the
supplemental appropriation.
8:53:30 AM
Representative Gara asked Mr. Weise if the $300 million
appropriation is in conjunction with the bill. He further
queried the number of improvements that would qualify for a
rebate if a person is below the 60 percent median income and
owns a home.
Mr. Weise explained that AHFC assesses homes using a program
to verify predicted energy savings. Those who qualify for
energy savings would extend to 100 percent median income
level. All expenses would be paid through AHFC and there
would be no out-of-pocket expenses to the homeowner. The
retrofits would be subsequently verified by AHFC to affirm
that the actions applied increase energy efficiency.
8:55:22 AM
Representative Gara asked if an applicant below 60 percent
of the median income, with a five star upgrade, would
receive 100 percent of the rebate.
Mr. Weise elucidated the two prong approach: first, income
qualifications or second, energy efficiency verified by
AHFC. He avowed that state assistance is available as long
as energy savings is confirmed. Those not qualifying under
low income would undergo a pre-assessment by AHFC with
approval in advance of work proposed. The homeowner would be
responsible for either performing the work or contracting a
company to do so. The Alaska Housing Finance Corporation
would do a post-assessment corroborating the improvements
and as long as they were in accordance, a rebate would
arrive to match the program model in energy star ratings.
Representative Gara asked if there would be an income cap.
8:56:56 AM
Mr. Wiese observed that there are no income requirements for
the rebate program. Those who apply would most likely have a
low energy star rating. A person who lives in a four star
home and gets approval from AHFC to rebuild to a five star
rating would be reimbursed the rebate amount of $2500, equal
to one rating jump, even if they spent $10,000.
8:57:49 AM
Vice-Chair Stoltze asked if the inherent economic value of a
home is figured into the formula and what would constitute a
bad investment for Alaska Housing Finance Corporation.
Mr. Weise replied that AHFC has engaged in these activities
for some time. He felt assured that AHFC would not invest in
something that would not result in efficiency.
8:59:34 AM
BRIAN BUTCHER, LEGILSATIVE LIASON, ALASKA HOUSING FINANCE
CORPORATION, explained that the organization would determine
what amount of work is reasonable. The previous goal was to
spread $4 million in state and federal funds as widely as
possible. In this instance a low sum of $4,000 turned out
to be the average amount spent on a home. With greater
monies available there could be an increase to $7,000 or
$8,000 per house. He reiterated that through the regulation
process AHFC would ascertain a reasonable amount of average
funds per home.
Vice-Chair Stoltze asked if the priority would be to
identify the most efficient approach regardless of esthetic
value under a $7000 cap. Mr. Butcher responded that most
energy efficient improvements are relatively inexpensive.
9:02:18 AM
Mr. Butcher explained the rating process. Based on the pre-
evaluation, a homeowner can choose what project to pursue in
order to receive a higher rating. The home is assessed again
for effective upgrades upon completion, at which point the
homeowner is eligible for a rebate.
DAN FAUSKE, CEO/EXECUTIVE DIRECTOR, ALASKA HOUSING FINANCE
CORPORATION, added that with a $5000 investment, based on
oil prices of $100 per barrel, the return is approximately
57 percent. He underlined that the high rate of return is
due to energy efficiency. He noted that in the present
economy payback is accelerated and substantial.
9:04:59 AM
Co-Chair Meyer clarified that the program is contingent upon
the $300 million in the supplemental budget. He understood
that $200 million would be for persons meeting income
requirements and $100 million would be for homes conditional
upon authorization by AHFC. Mr. Weise confirmed the
statement.
9:05:23 AM
Representative Nelson asked about the process of requesting
a rater in a small community. Mr. Butcher explained that for
cost efficiency an energy rater would be scheduled in a
community to assess all homes requesting a rating. The
organization is currently working on streamlining the
process.
9:06:45 AM
Representative Nelson noted that that there are over 200
villages and inquired about prioritizing by region. Mr.
Butcher confirmed that there is a regional breakdown of the
state by population and heating days which establishes
priority order and monetary distribution.
9:07:24 AM
Representative Hawker understood that there are two programs
within AHFC that have been developed over time under a
broader statutory authority. He clarified that they are
developed internally within AHFC, not programs that exist
independently in statute.
Mr. Bryan Butcher, assented that the practical details are
mapped out in the regulations.
Representative Hawker ascertained that the purpose of the
legislation is to empower AHFC to define how the programs
should operate. Mr. Butcher revealed that there had been
discussion internally about raising the median income limit
for the weatherization program. He stated that though
assistance for low income households will always remain the
priority, those above the current median also struggle with
energy costs.
9:09:09 AM
Representative Hawker noted that the change in the median
income level would be addressed through internal regulation.
Though the provision allows for a broader scope, there is no
mandate to make the changes and nothing prohibiting AHFC
from establishing the percentage at whatever it deems
appropriate. Mr. Butcher agreed.
9:10:26 AM
Representative Hawker said the policy question is how much
control the legislature wants to have and how much control
is allowed for AHFC. He asked if a letter of intent should
accompany the bill in order to establish parameters.
9:11:54 AM
Mr. Fauske acknowledged that the intent is clearly to
control the program by not leaving it open to abuse.
Further, the intent addresses quality of life issues and
improvement on the housing stock but most importantly
maximizing the reduction of energy use in the state. He
emphasized both a desire to be as broad as possible to
capture as many homeowners as possible and a desire to
stretch funds as far as possible. He was unfamiliar with the
effects of a legislative restriction placed on AHFC by
writing down the median income requirements.
9:12:57 AM
Representative Hawker asked if raising the weatherization
percentage to 100 percent, would be high enough to maximize
the benefit to the State. Mr. Fauske felt that increasing
the percentage would be a wise, effective tool in expanding
the benefit to more people.
9:14:11 AM
Mr. Butcher speculated on the exclusion of the median income
level percentage in statute. He said that it was not talked
about because AHFC can only estimate how quickly funds will
be used and how many homes will receive the funds. There
will not be certainty with regards to the right percentage
until the program is underway for two or more years. Alaska
Housing Finance Corporation plans to strive towards 100
percent, but the omission allows AHFC to return to the
legislature if adjustments need to be made to administer the
program effectively.
9:14:52 AM
Co-Chair Meyer commented that the bill would be held in
Committee and that the provisions in the bill are dependent
on the passage of the $300 million in the supplemental.
Representative Gara surmised that if funds are used up
quickly than there is no need to increase the eligibility
guidelines. He emphasized the importance of maintaining the
advantage for low income. Mr. Butcher agreed the highest
priority is for low income residents. Each community
benefits if the amount of energy being used is reduced.
9:16:28 AM
Representative Gara questioned if there are construction
requirements that new houses have to be energy efficient.
Mr. Butcher said AHFC funds are not available to new homes
unless they are built to a four or five star rating.
Currently homes across the state are almost uniformly being
built to that level. Representative Gara wanted to know if
commercial buildings are built to higher ratings as well.
Mr. Fauske believed they were but was not certain. He noted
that the provision will generate approximately 1000 jobs. He
named various ways to economize programs and projects
through mass purchasing and addressing the rating of homes
more efficiently.
9:19:24 AM
Representative Joule asked if housing authorities around the
state have raters. Mr. Fauske responded that AHFC certifies
the raters.
BOB BREEN, DIRECTOR, ALASKA HOUSING FINANCE CORPORATION,
(Testified via Teleconference), disclosed there are energy
raters who already work for some housing authorities. He
elaborated that AHFC also sends raters to work with a number
of housing authorities needing inspectors. The intent is to
train 40 to 60 more energy raters statewide.
9:20:39 AM
Representative Joule queried geographic adjustment for
higher costs farther out. Mr. Fauske answered that though
there are no regional cost adjustments, experience has shown
that the cost differentials are taken into account.
9:21:40 AM
Representative Joule alluded to earlier discussion regarding
monetary adjustments to accomplish the same goals in
different townships. Mr. Breen explained a variable built
into the software rating program that takes into account
cost of fuel, heating degree days, and cost of living in
different areas.
9:23:12 AM
Representative Kelly requested an outline from AHFC spanning
the 30 year history of its conservation and weatherization
programs. He specifically requested numbers referencing the
percentage of the housing stock rated for energy efficiency
and dollars spent on upgrades. He asked the opinion of
Alaska Craftsman Home Program and energy rated homeowners
regarding the broader language in the bill.
9:24:18 AM
Mr. Fauske provided some history. Eleven years ago, feuding
erupted among state housing agencies; thus specific names
appear in statute. Alaska Housing Finance Corporation did
not want to regulate the industry and felt home-building
groups should police themselves. However, adopting a general
rating system would require a standard. The Cold Climate
Housing Research Center (CCHRC) developed as a central
testing center and institution whose methods were accepted
by all. The main reason for removing the names from the
statute is that they are no longer necessary and encourage
earmarking. He said there have been no complaints to the
corporation.
Representative Kelly asked for assurance of continuing high
standards set by key players no longer referred by name in
the bill. He again requested figures for the past 30 years.
9:26:33 AM
Mr. Breen agreed to provide the information. He interjected
that in the early years the program ran on minimal funding.
Federal regulations allowed only a small amount of money for
each home. Good work happened but often not enough to make a
home energy efficient.
Mr. Fauske recalled an incident eight years ago celebrating
the weatherization of the 10,000th home statewide to achieve
energy efficiency.
Mr. Breen affirmed varying degrees of program assistance,
with one home receiving $500 worth of repair and another
$4,000. He applauded the program's long history and success
as a win-win situation and emphasized his thirty year
association with it.
9:28:29 AM
Representative Kelly pointed out that cabins in rural areas
are sometimes heated very differently than homes in an urban
center such as Fairbanks. He wanted to ensure that AHFC is
not overly focused on places with multiple resources as
opposed to areas where a majority of the population lives.
9:29:49 AM
Representative Thomas commented on a Senate majority
presentation which divulged the large difference between
heating a home in Anchorage at an average rate of $1400 and
a home in Fairbanks at $14,000. He stressed concentration of
efficiency upgrades in rural places where the cost of energy
is higher.
Representative Thomas related a personal experience with
wood heat and electricity. He probed into AHFC's changing
"specs" and was curious to know if in a house with a
thermostat the water tank and furnace are linked to turn on
every 20 minutes under current efficiency criteria.
He queried about what to do for someone with a five star
energy rating whose costs have increased. As a past tribal
president, he interpreted SB 289 as duplicating hundreds of
thousands of dollars of work already done through The
Native American Housing Assistance and Self-Determination
Act. He wondered how many times a rater returns to a home
to assess efficiency as standards adapt.
9:32:39 AM
Mr. Fauske noted AHFC's challenge in balancing both urban
and higher-cost, harder to access rural areas of the state.
He also recognized that communities rely on a range of
heating sources. He assured understanding that AHFC
accurately prioritize and delegate dollar amounts according
to many variables including: kinds of energy consumed,
remoteness of locations, time allotted to a ramping up
period, density of dwellings in an area and types of houses
erected.
Mr. Fauske expressed excitement over the proposed $300
million allocation, its equitable distribution and the
ultimate goal of a reduction in energy usage around the
state. He assured that the AHFC network will remain
receptive to communication from people living in all
regions.
9:35:27 AM
Mr. Fauske realized, with regards to four or five star
homes, that new technologies have limits. The idea is to
make improvements that will last 30 years; AHFC will not
revisit a house every few years. A highly-rated homeowner
may choose to redo an attic or replace windows knowing the
cost benefit ratio has payback in itself.
9:36:20 AM
Mr. Butcher spoke to the $300 million dollar sum and
reiterated unknowns as to how many people will choose to
participate. Until the program is underway there is
uncertainty of how much money is ample.
9:37:32 AM
Mr. Fauske envisioned the legislation expanding to public
buildings as well.
9:38:07 AM
Representative Hawker referenced discussions with an
economist. He asked if opposition has surfaced regarding the
efficiency of this approach in dealing with a long term
energy plan.
Mr. Fauske stated that some had suggested funds are better
spent in alternative energy. He maintained that he had
personally witnessed results and that the program, if well-
managed, is an extremely efficient plan.
Representative Hawker shared Mr. Fauske's beliefs and added
that if there is disagreement he wanted the other side to
come forward.
9:41:07 AM
Mr. Fauske spoke of savings through technological upgrades.
Mr. Breen encouraged the economist to visit the CCHRC in
Fairbanks to talk with their President, Jack Hébert. He
upheld that touring the facility's labs is both an eye-
opening and impressive experience.
9:42:30 AM
Representative Nelson expressed gratitude for the
legislation and commented that weatherization was named as
the first tactic in a state energy policy by newly appointed
Energy Coordinator, Steven Haagenson. She added that her
district would continue to rely on diesel even as they
explore a replacement through wind power. High-penetration
turbines are not a constant resource when there are no
hydrogen storage units to save the energy. She noticed a
trend in which families at prime earning capacity who cannot
afford fuel in their newer homes are moving back into
smaller, dilapidated buildings. Residents are looking in
turn at weatherizing these old houses. She thanked the
administrators for expanding the program and its timely
arrival for needy families.
9:45:21 AM
Mr. Fauske cited a conversation with an individual from
Bethel, Tim Meyers who also says that people are tending
back to the old ways with new technology to maximize
efficiency. Mr. Meyers possesses a unique design sense and
collaborates with CCHRC. He has built and continues to farm
potatoes underground.
Mr. Fauske regretted that sometimes change in an
unconventional direction is difficult. Retired persons are
moving to town because they cannot afford rural living on a
fixed income. He agreed, along with Mr. Meyers who feels
adamantly, that all technologies need to be looked at.
9:46:31 AM
Representative Gara expressed support for the bill but
voiced concern as to whether the distribution of funds would
take into account the hardship on people in districts with
elevated monthly fuel bills. Mr. Fauske pledged that an
extreme effort would be made to assist those areas quickly.
Representative Gara inquired about weatherizing a
residential home before a recreational cabin. Mr. Fauske
confirmed that the buildings would be attended to in this
order.
Representative Gara asked if a wood-heated house would be
discriminated against because of more greenhouse gas
emissions or the cost and effort problems facing a homeowner
who cuts his own fuel verses buying it.
Mr. Fauske responded that it would not.
9:48:28 AM
Representative Kelly asked if the AHFC would participate in
installing a catalytic converter wood stove. Mr. Fauske
stated that the AHFC has no restrictions on any building
technologies as long as the house is conforming to
standards. Mr. Breen concurred and added that he encourages
homeowners to explore alternatives and provides information
about other less costly heating sources.
9:49:46 AM
Representative Kelly rephrased his inquiry into the
willingness of the AHFC to help with the purchase of a new
stove. Mr. Breen replied yes; assistance is usually
reflected in the post-rating.
Representative Kelly asked about the extent of AHFC's
backlogged application requests. He delved into the
procedure of framing in unnecessary windows. Mr. Fauske
confirmed the practice.
Representative Kelly broached the topic of fraud in the
initial program and inquired as to current status.
9:51:30 AM
Mr. Fauske said he had not heard the term fraud used at all
in recent memory. Inspection and follow-up seem to leave no
room for deception, and the post-assessment test is
conclusive. On the $1 million rebate side of the bill where
substantial enhancements towards energy efficiency are
verified by AHFC, he approved of an initial investment that
pays benefits. Deducting the inspection fee from the rebate
or raising the rebate amount are subjects that have also
been discussed.
Representative Kelly asked for clarification of the
investment piece on the $2 million side, the income
qualification portion of the bill.
9:53:25 AM
Mr. Butcher informed the committee that the $2 million
appropriation funds a grant program for people under the
100% median income level who can not afford energy
improvements to their home. He repeated that investing with
benefits over time is for folks who can afford to put in
their own money and get a rebate. As AHFC proceeds through
the regulation process and public comment, it will determine
incentives appearing as a definitive rebate amount. He
offered some history and detailed that the rebate program
has been inactive since the early 1990s when it was
eliminated due to budget pressures.
9:54:21 AM
Representative Kelly warned against the potential of waste
when no investment is required by those persons receiving
money from the state. He solicited ideas regarding ways to
hold low-income Alaskans accountable.
SB 289 was HEARD and HELD in Committee for further
consideration.
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