Legislature(2007 - 2008)HOUSE FINANCE 519

07/31/2008 04:00 PM FINANCE

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Heard & Held
-- Testimony <Invitation Only> --
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
HOUSE BILL NO. 4005                                                                                                           
     An  Act amending  the power  cost equalization  program,                                                                   
     repealing the exclusion from  eligibility for power cost                                                                   
     equalization for certain  power projects that take their                                                                   
     power  from hydroelectric  facilities, and amending  the                                                                   
     definition of 'eligible electric  utility' as it applies                                                                   
     to  the power cost  equalization  program and the  grant                                                                   
     program   for   small   power   projects   for   utility                                                                   
     improvements; and providing for an effective date.                                                                         
5:03:01 PM                                                                                                                    
Vice-Chair Stoltze  MOVED to ADOPT work  draft #25-LS17557\E,                                                                   
Kane,  7/31/08,  as  the  version  of  the  bill  before  the                                                                   
Committee.  There being NO OBJECTION, it was so ordered.                                                                        
SUZANNE   ARMSTRONG,  STAFF,   REPRESENTATIVE  KEVIN   MEYER,                                                                   
explained the work draft, sectional analysis:                                                                                   
   ·    Section one pertains to the Power Cost Equalization                                                                     
        (PCE) program containing  the formula as  it appeared                                                                   
        in  the original  version  of  HB  4005  with  a  few                                                                   
        modifications. Modifications  including the  lowering                                                                   
        of the ceiling  rate from two  dollars to 75  cents a                                                                   
   ·    Section two is a new addition to the bill proposing                                                                     
        to repeal the  new PCE formula  on June 30,  2011 and                                                                   
        return to the formula currently in statute.                                                                             
   ·    Section three is a work in progress, the premise                                                                        
        being, under HB4005 there are no  new entrants to the                                                                   
        PCE program.  The  non  PCE eligible  utilities  will                                                                   
        instead receive five cents per kWh  for the first 500                                                                   
        kWh  a  month  sold   to  each  of   the  residential                                                                   
5:06:23 PM                                                                                                                    
Representative  Joule asked  about the  impact on  utilities.                                                                   
Ms.  Armstrong   explained  that   all  utilities   would  be                                                                   
impacted. The  bill is meant to  be a two and two  third year                                                                   
sunset, with  the five  cents per kWh  also repealed  on June                                                                   
30, 2011.                                                                                                                       
Co-Chair Meyer  clarified that the initial intention  was for                                                                   
a two year  sunset, but he  wanted to make sure  the decision                                                                   
to continue or discontinue the  program was not influenced by                                                                   
an election year.                                                                                                               
5:07:40 PM                                                                                                                    
Representative Nelson asked if  Anchorage would pay six cents                                                                   
per kWh if the cost of electricity  was lowered by five cents                                                                   
for  non  PCE users.  Co-Chair  Meyer  responded  that  would                                                                   
depend  on which  utility company  is  used.   Representative                                                                   
Nelson asked  if there had  been a "human  cry" for  rates to                                                                   
decrease.   Co-Chair Meyer stated  that the electrical  costs                                                                   
have gone up in both urban and rural areas.                                                                                     
5:09:03 PM                                                                                                                    
Representative  Nelson wanted  a perspective  of costs.   She                                                                   
referenced Stephen's  Village, which  pays over a  dollar per                                                                   
kWh and  would be  covered up to  72.5 cents, whereas  Juneau                                                                   
would be  paying six  cents per kWh.   Ms. Armstrong  replied                                                                   
that was  correct; the  ceiling in  the committee  substitute                                                                   
was seventy  five cents per  kWh.  Co-Chair Meyer  recognized                                                                   
the  need  to  go  above  the  seventy  five  cents,  but  he                                                                   
advocated  a  starting  point.   He  asked  that  the  entire                                                                   
package be addressed.                                                                                                           
Representative Kelly asked if  the non PCE five cent approach                                                                   
would sunset  at the same time.   Ms. Armstrong  replied yes,                                                                   
the entire PCE legislation would  be addressed in the future.                                                                   
5:11:09 PM                                                                                                                    
Representative  Crawford  thought  the  bill might  take  the                                                                   
state  in the  opposite  direction  and that  it  would be  a                                                                   
disincentive  to  Anchorage  to  conserve.    Co-Chair  Meyer                                                                   
explained  that according  to Chugiak,  the average usage  in                                                                   
Anchorage is 750 kWh per month  and the bill is capped at 500                                                                   
kWh per month, with the incentive  to keep use under 500 kWh.                                                                   
The  average monthly  cost for  electricity  in Anchorage  is                                                                   
$100  dollars.   Representative  Crawford  did  not think  it                                                                   
would provide incentive to conserve.                                                                                            
5:14:15 PM                                                                                                                    
Representative  Thomas asked  if the  reduction would  be for                                                                   
residential   use  only.     Ms.   Armstrong  answered   yes.                                                                   
Representative  Thomas pointed  out that he  had not  heard a                                                                   
"cry"  for  an  electricity  break;  he  noted  that  he  had                                                                   
communities that pay  85 cents per kWh showing  concern.  Co-                                                                   
Chair Meyer asked  what electricity would cost  under PCE, at                                                                   
50 cents per kWh.                                                                                                               
5:16:21 PM                                                                                                                    
DAVID   TEAL,   DIRECTOR,   LEGISLATIVE   FINANCE   DIVISION,                                                                   
referenced  the chart  "Comparing Monthly  Electric Bills  at                                                                   
Various Costs and Usage."  (Copy on File).                                                                                      
Co-Chair Meyer  clarified that if  the rate was 50  cents per                                                                   
kWh then it would cost 15 cents  with PCE, as long as the use                                                                   
was less than 500 kWh each month.                                                                                               
5:18:15 PM                                                                                                                    
Representative  Gara discussed  Anchorage qualifications;  he                                                                   
asked the number of those that  would qualify.  Ms. Armstrong                                                                   
replied  that  the  two  utilities  in  Anchorage  would  not                                                                   
qualify, because the bill proposes  to add no new entrants to                                                                   
the PCE  program.   Under the  proposed legislation,  the non                                                                   
PCE utilities  would qualify for  the five cents per  kWh for                                                                   
the first 500 kWh in a month.                                                                                                   
Representative  Nelson  asked  for information  on  how  much                                                                   
urban  Alaskans  spend  on  their utility  bill.    Mr.  Teal                                                                   
referenced page five of the packet.                                                                                             
5:21:16 PM                                                                                                                    
Ms. Armstrong continued with the overview:                                                                                      
   ·    Section four repeals the five cents per kWh on June                                                                     
        30, 2011.                                                                                                               
   ·    Section five, repeals two sections that appeared in                                                                     
        HB 152, which made the Alaska Heating Assistance                                                                        
        Program retroactive to November 1 2007.                                                                                 
Co-Chair Meyer  stated that "with the additional  $10 million                                                                   
recently  added  to  the existing  federal  $10  million  Low                                                                   
Income Heating  and Energy Assistance (LIHEAP)  qualifying is                                                                   
now at  225 percent  of the  poverty level."   He added  that                                                                   
this bill  simply increases  the amount  lower income  people                                                                   
can get.                                                                                                                        
Ms. Armstrong  continued with  section six which,  applies to                                                                   
the state  implementation of the  Federal Low  Income Heating                                                                   
and Energy  Assistance Program  (LIHEAP) and it  provides for                                                                   
the period beginning  October 1  2008 through  June 30, 2011.                                                                   
The  per dollar  value  of a  community  heating cost  point,                                                                   
which  is calculated  under  regulation  may  increase to  an                                                                   
amount of  170 dollars.   Each point  is calculated on  a per                                                                   
dollar basis allowing  the department to increase  this to an                                                                   
amount not to exceed 170 dollars.                                                                                               
Representative Nelson requested further explanation.                                                                            
Ms. Armstrong requested that Department  of Health and Social                                                                   
Services (DHSS)  address how the benefits are  determined for                                                                   
the low income  heating program.  Her understanding  was that                                                                   
the  system established  the  criteria,  and the  application                                                                   
assigned points  for status.   The  total number points  were                                                                   
for heating cost  point value.  The value is  $85 dollars per                                                                   
point not to exceed $170 per point.                                                                                             
Representative  Nelson asked  if this  meant $85 dollars  per                                                                   
month.   Ms. Armstrong replied  that an individual  may apply                                                                   
to DHSS  for the period beginning  October 1  to April.   The                                                                   
full benefit  is calculated  by the department;  it is  not a                                                                   
per month allocation, but a set amount.                                                                                         
Co-Chair Meyer  continued that  anyone who qualified  for the                                                                   
LIHEAP program  previously will receive double  the amount of                                                                   
assistance than from  the old program.  The  new program will                                                                   
provide more money to those that need it.                                                                                       
5:28:17 PM                                                                                                                    
Ms. Armstrong continued the overview:                                                                                           
   ·    Section six pertains to the Federal Low Income                                                                          
        Heating Assistance and how the heating cost point                                                                       
        will be adjusted.                                                                                                       
   ·    Section seven pertains to the Alaska Heating                                                                            
        Assistance Program and how the community heating                                                                        
        cost point will be increased.                                                                                           
   ·    Section eight pertains to the Alaska Resource Rebate                                                                    
        Section, changing the amount from $1200 to $1000,                                                                       
        including a statement notifying recipients that the                                                                     
        rebate is a one time payment to qualified Alaskans.                                                                     
   ·    Section nine pertains to suspension of the motor                                                                        
        fuel tax.                                                                                                               
   ·    Remaining are effective date sections.                                                                                  
5:29:46 PM                                                                                                                    
Co-Chair Meyer  pointed out that  all the sections  sunset on                                                                   
June  30, 2001,  with the  exception of  the Alaska  Resource                                                                   
Rebate which is a one time payment.                                                                                             
5:30:18 PM                                                                                                                    
Vice-Chair  Stoltze commented  on the conversation  regarding                                                                   
the legislation  privileging Anchorage. He did  not think the                                                                   
issue was regional.                                                                                                             
Co-Chair Meyer pointed out that  the intent of the bill is to                                                                   
help with four major statewide  utility concerns. He admitted                                                                   
that the bill needs work.                                                                                                       
Co-Chair Chenault  referenced page  4, line 25,  stating "The                                                                   
Department of  Revenue may  assess a penalty  of up  to $5000                                                                   
against  any person  that  fails  to provide  the  supporting                                                                   
invoices  as required  by this  subsection."   Ms.  Armstrong                                                                   
responded that the link was included in HB 4004.                                                                                
5:33:28 PM                                                                                                                    
Representative  Nelson  asked  the  fiscal  impact  for  each                                                                   
section.    Ms.  Armstrong  stated   that  fiscal  notes  are                                                                   
currently being evaluated.                                                                                                      
Representative  Nelson referenced  Section two,  specifically                                                                   
the five  cent reduction in urban  use versus the  changes to                                                                   
PCE.   She questioned  the impact  of the  LIHEAP program  to                                                                   
households.    Mr. Teal  stated  that the  graph  exemplifies                                                                   
payments under the  heating assistance.  He  estimated that a                                                                   
household could  receive roughly $3000  from LIHEAP.   Once a                                                                   
household  is assigned  a  point value,  it  is adjusted  for                                                                   
household  size and income  level.   He referenced  the chart                                                                   
"Heating  Assistance  Benefits  at  Various  Income  Levels."                                                                   
(Copy on File).                                                                                                                 
Mr. Teal stated that people in  rural Alaska could receive up                                                                   
to 35 points  and anywhere between $1500 and  $3000 depending                                                                   
on  their income  and the  area in  which they  reside.   The                                                                   
state LIHEAP  program is  assigned $10  million dollars.   To                                                                   
double  benefits,  the  maximum   benefit  increased  to  six                                                                   
thousand   dollars.      He  concluded   that   without   any                                                                   
applications received this year, the cost was yet unknown.                                                                      
5:39:00 PM                                                                                                                    
Representative Nelson  understood the concept  of pro rating;                                                                   
however, she  wanted to understand  the precise  cash benefit                                                                   
per month  to a struggling  person.  Ms. Armstrong  responded                                                                   
that there was  a packet of information from  DHSS indicating                                                                   
scenarios of various areas in  the state. When the department                                                                   
worked on  the passage of  state heating assistance  program,                                                                   
they gave the estimate that 3800  additional households would                                                                   
become eligible.                                                                                                                
Representative  Nelson stressed  that  her question  remained                                                                   
5:40:59 PM                                                                                                                    
RON  KREHER, DIVISION  OF  PUBLIC ASSISTANCE,  DEPARTMENT  OF                                                                   
HEALTH  AND  SOCIAL  SERVICES  explained  the  difficulty  of                                                                   
determining the actual  benefit because of the  nature of the                                                                   
point  system.   A household  living  in a  community with  a                                                                   
harsh climate,  heating with  diesel fuel,  with an  elder or                                                                   
child under the age of five could  receive the maximum number                                                                   
of points, given  this piece of legislation.  That could mean                                                                   
$6000 per  household.  Depending on the  heating cost  needs,                                                                   
the purpose is to off-set costs.   He explained that there is                                                                   
a lot  of variability depending  on the household  income and                                                                   
living situation.                                                                                                               
Representative  Nelson  referenced  page  2 and  the  average                                                                   
payment of  two separate Alaskan  communities.  She  asked if                                                                   
the payment  was made  each month.   Mr. Kreher replied  that                                                                   
one payment  was made  per heating  season, with one  heating                                                                   
season per year.                                                                                                                
5:43:23 PM                                                                                                                    
Representative  Gara commented  on providing  state money  to                                                                   
everyone in  a utility below  15 cents a  kWh.  He  wanted to                                                                   
see  the state  spend  resources for  those  in the  greatest                                                                   
crisis. He did not agree with  giving state money to everyone                                                                   
in a utility below 15 cents per kWh.                                                                                            
5:44:44 PM                                                                                                                    
Ms.  Armstrong  referenced  the cost  analysis  handout.  She                                                                   
requested further explanation of the handout by Mr. Teal.                                                                       
5:45:25 PM                                                                                                                    
Mr. Teal  noted the cost  model in column  one, which  is the                                                                   
existing  program  with the  floor  at  12.83 cents  and  the                                                                   
ceiling  at 52.5 cents,  with a  cost of  $32 million.   This                                                                   
would all  go to currently  qualified utilities,  without any                                                                   
new entrants.   He explained that column one  exemplifies the                                                                   
program as  it currently  exists.   The program is  currently                                                                   
funded at $28  million. Column two shows what  will happen if                                                                   
fuel  and  electric  prices  increase,  and  the  legislature                                                                   
provides supplemental  funding. The program costs  will go up                                                                   
to approximately  $42 million. Then PCE  reimbursements would                                                                   
be pro-rated.   It was necessary to raise the  ceiling to two                                                                   
dollars, because  currently, nobody  has an electric  cost of                                                                   
two dollars.   With no ceiling, the program  would cost about                                                                   
58 million dollars. The floor  becomes a critical factor when                                                                   
the large urban  utilities are included.  The  only ones that                                                                   
qualify  with this floor  are Golden  Valley, Kodiak,  Homer,                                                                   
Copper Valley, and  Kake with $15 million allocated  to these                                                                   
newly  qualified  utilities  and  $58 million  going  to  the                                                                   
existing utilities.   Because there were new  entrants and it                                                                   
was important  to  keep the costs  the same  as the  existing                                                                   
program, the floor was raised.  These were policy calls aimed                                                                   
at   keeping   costs   contained.  These   are   not   policy                                                                   
recommendations,  but merely an  attempt to keep  costs even.                                                                   
If the  program is  extended to all  urban utilities,  with a                                                                   
slightly reduced  ceiling of 75  cents, there is  a reduction                                                                   
in payments to currently qualified  utilities and an increase                                                                   
in payments to the newly qualified.                                                                                             
5:52:01 PM                                                                                                                    
Representative Gara  asked for clarification on  the increase                                                                   
to the  cost of the  program to  $65 million, through  giving                                                                   
utilities five cents  per kWh if they are under  15 cents per                                                                   
Mr. Teal  responded that the  urban utilities are  many times                                                                   
larger,  which explains  the increased  cost.  Representative                                                                   
Gara reiterated his question.   Mr. Teal responded that every                                                                   
new utility that qualifies receives five cents per kWh.                                                                         
5:54:06 PM                                                                                                                    
Representative Gara  asked about the expense for  each of the                                                                   
utilities that charge less than  15 cents. Mr. Teal explained                                                                   
the method for adding up the cost.                                                                                              
5:54:35 PM                                                                                                                    
Co-Chair Meyer clarified  the question as "what  is the state                                                                   
spending on those who pay less than 15 cents per kWh."                                                                          
5:55:20 PM                                                                                                                    
Representative Thomas  noted that Kake Tribal  Corporation is                                                                   
mistakenly misrepresented in the  provided handout in regards                                                                   
to  cost  per kWh  in  Kake.  Mr. Teal  explained  that  this                                                                   
information  was provided  by  the Regulatory  Commission  of                                                                   
Alaska (RCA) and  is not completely accurate. It  needs to be                                                                   
cleaned up.                                                                                                                     
5:57:08 PM                                                                                                                    
Representative  Joule pointed out  that there is  an anomaly,                                                                   
as the North Borough  would not be able to take  advantage of                                                                   
the  subsidy because  they do  not  pass along  the costs  to                                                                   
their customers.  He would  like to find  a way to  make sure                                                                   
that they can be reimbursed like the other utilities.                                                                           
Co-Chair  Meyer agreed  that the  incentive  to conserve  and                                                                   
efficiency should always be at the forefront.                                                                                   
5:59:38 PM                                                                                                                    
Representative Hawker  referenced conflicting  testimony over                                                                   
the weekend  between the Alaska Village  Electric Cooperative                                                                   
(AVEC) and Alaska Energy Authority  (AEA) regarding revolving                                                                   
loan   funding.   He  wanted   representatives   from   those                                                                   
organizations  to  come  in  to clarify.  It  would  be  very                                                                   
helpful  if the fiscal  notes included  per capita  estimated                                                                   
benefits  of  the  programs,  especially  from  an  objective                                                                   
source such as the departments.                                                                                                 
Vice-Chair Stoltze asked for clarification.                                                                                     
Co-Chair Meyer noted  that the revolving loan  fund was never                                                                   
resolved  and he  was not  sure that  the PCE  fund had  been                                                                   
resolved either. He asked if the  new portion included in the                                                                   
bill  would come  from the  discussed  PCE fund  or from  the                                                                   
general fund.                                                                                                                   
Ms. Armstrong thought that would  be up to the committee. She                                                                   
described  that  there  is an  appropriation  in  HB4003  for                                                                   
additional funds to PCE.                                                                                                        
6:02:38 PM                                                                                                                    
Representative  Crawford  asked  about  the  motor  fuel  tax                                                                   
suspension, noting the amount  of paperwork created. At eight                                                                   
cents per gallon, there is minimal  benefit for the amount of                                                                   
paperwork  required to  get reimbursements.  He thought  that                                                                   
making a  direct payment  may be an easier  way to  arrive at                                                                   
the same goal.                                                                                                                  
Co-Chair Meyer asked for clarification.                                                                                         
Representative Crawford explained.  The other point he wanted                                                                   
to make concerning  diesel and aviation fuel.  He wondered if                                                                   
a direct payment might make more sense.                                                                                         
6:05:39 PM                                                                                                                    
JERRY   BURNETT,   DIRECTOR,   DIVISION   OF   ADMINISTRATIVE                                                                   
SERVICES, DEPARTMENT  OF REVENUE,  explained the  various tax                                                                   
rates on different  kinds of fuel. Marine fuel is  taxed at 5                                                                   
cents per gallon, aviation gasoline  is 4.7 cents per gallon,                                                                   
and jet fuel is 3.2 cents per  gallon. The federal government                                                                   
funds the  department for the  cost of tracking  these taxes.                                                                   
The positions for  tracking and collecting of  motor fuel tax                                                                   
are  funded  by  the federal  government  through  their  tax                                                                   
collections, so there is not a  general fund cost to do this.                                                                   
Representative Thomas  asked if the  marine fuel tax  at five                                                                   
cents per gallon was shared with the municipalities.                                                                            
6:06:45 PM                                                                                                                    
Mr. Burnett  answered that  there is not  a tax sharing  with                                                                   
anything  except  for  the  aviation  fuel  portion  sold  at                                                                   
municipal airports.                                                                                                             
Representative   Thomas   asked  if   the   state  would   be                                                                   
subsidizing  the  non-resident  fishermen by  suspending  the                                                                   
motor fuel tax.                                                                                                                 
Representative  Gara commented  on a  gasoline study  showing                                                                   
that  refiners  set  their  price based  on  what  they  know                                                                   
Alaskans would  have to pay if  importing gas from  the lower                                                                   
48 state.  He asked whether the  refiners or the  dealers pay                                                                   
the motor  fuel tax  to the state.  Mr. Burnett replied  that                                                                   
the  motor fuel  tax is  collected at  the distributer  level                                                                   
when it is sold to retailers.                                                                                                   
Representative Gara  stated that refiners base  their charge,                                                                   
not on what it costs them to refine  fuel, but what they know                                                                   
they  can charge  given the  alternative of  shipping gas  up                                                                   
from the lower  48.  He maintained that once  the eight cents                                                                   
is suspended,  the refiners  will just add  it back on.   Mr.                                                                   
Burnett  could not  speak to  what  refiners or  distributors                                                                   
would  charge for  their fuel.   He asserted  that, in  other                                                                   
states  where motor  fuel tax  has been  removed, gas  prices                                                                   
have fallen as a result.                                                                                                        
Representative  Gara pointed  out that  other states  are not                                                                   
1,000  miles  away from  the  nearest  refinery source.    He                                                                   
requested  information  to  dispute   the  finding  that  gas                                                                   
refiners charge  what they know  they can, based on  how much                                                                   
it would cost to  import gas from the lower 48.   Mr. Burnett                                                                   
did not have any information to dispute that.                                                                                   
Representative  Gara stated  that  he did  not  want to  give                                                                   
money to the  refiners.  Mr. Burnett responded  that there is                                                                   
some competition on the market.   Not all fuel is sold by one                                                                   
refiner or  distributor, so he  believed that with  the motor                                                                   
fuel suspension, there would be a price effect.                                                                                 
Representative Gara  asked for the administration's  analysis                                                                   
before the suspension was implemented.   He felt there was no                                                                   
credible information  that the  savings will  make it  to the                                                                   
consumers.  Mr.  Burnett was not familiar with  the study and                                                                   
therefore did not have a response.                                                                                              
Co-Chair Meyer  pointed out that  Anchorage is  a competitive                                                                   
market so  that if one distributer  removed the  eight cents,                                                                   
the others would have to as well.   Representative Gara asked                                                                   
who  pays the  tax.   Mr.  Burnett replied  that  the tax  is                                                                   
collected  at   the  distributer  level  when   the  retailer                                                                   
purchases it from the distributer.   The wholesaler is adding                                                                   
the  tax to  the price  when the  retailer buys  it from  the                                                                   
6:12:39 PM                                                                                                                    
Co-Chair Meyer  requested that  members attempt to  achieve a                                                                   
balance  between urban  versus rural,  and low income  versus                                                                   
middle  income. He  encouraged awareness  regarding the  five                                                                   
cent  credit  per kWh  portion  of  the  PCE enabling  a  $25                                                                   
dollars per month savings in Anchorage,  and $300 dollars per                                                                   
month  benefit in  some  rural areas.  He  recommended a  new                                                                   
draft based  on comments. He  recommended that  amendments be                                                                   
Representative Nelson  requested follow up  on Representative                                                                   
Hawker's suggestion  regarding the  bulk fuel revolving  loan                                                                   
fund.  Ms. Armstrong offered to  speak with Ms. Sarah Fisher-                                                                   
Goad at  the Department of  Commerce, Community  and Economic                                                                   
Development,  and  attempt to  get  in  touch with  Ms.  Meer                                                                   
Kohler of AVEC for input.                                                                                                       
Representative Gara  wanted the administration  to testify on                                                                   
behalf of  a plan to  bring the savings  from the gas  tax to                                                                   
the  consumer.    He  wanted   to  see  an  analysis  by  the                                                                   
administration.    Co-Chair  Meyer agreed  that  an  analysis                                                                   
would be  important, because if  the tax were  suspended, the                                                                   
consumer would expect to see an eight cent savings.                                                                             
6:16:51 PM                                                                                                                    
Representative Thomas  commented on the Railbelt  energy area                                                                   
where  63 percent  of the people  live, and  only 27  percent                                                                   
live in  the rural area. He  stated that one-third of  the 27                                                                   
percent don't  drive. Co-Chair Meyer responded  that aviation                                                                   
and marine fuel are also included in the tax suspension.                                                                        
6:18:06 PM                                                                                                                    
Representative  Gara suggested  the  committee  find out  how                                                                   
much the state would pay by suspending  the gas tax, and then                                                                   
put it into another program that would benefit Alaskans.                                                                        
Co-Chair  Chenault commented  that gas  tax raises about  $40                                                                   
million dollars.  Mr. Burnett agreed.                                                                                           
Co-Chair Chenault asked where the eight cents goes.                                                                             
6:19:04 PM                                                                                                                    
RANDALL  RUARO, SPECIAL  ASSISTANT,  OFFICE  OF THE  GOVERNOR                                                                   
believed that  consumers will  see most  of the savings.  One                                                                   
reason he  cited was the competitive  market.  If  a retailer                                                                   
was not lowering  their price then they would  sell less gas.                                                                   
The proposed  suspension will benefit particularly  the urban                                                                   
areas.   He referred to  a study of  a gas suspension  in the                                                                   
year 2000 in  Indiana and Illinois, which determined  that 60                                                                   
to 80  percent of  the savings  were being  passed on  to the                                                                   
consumers.    He pointed  out  that  they  had worked  on  an                                                                   
amendment to insure that the savings pass through.                                                                              
6:20:58 PM                                                                                                                    
Representative Gara  understood that other  states administer                                                                   
the tax  in a  way that the  cost actually  goes back  to the                                                                   
consumer.  Refiners are  charging by  what it  would cost  to                                                                   
bring gas  up from the  lower 48 states.   Refiners  that pay                                                                   
the  gas  tax  probably  will   not  reduce  the  gas  price.                                                                   
Instead, they  will say "go  get it  from the Lower  48." The                                                                   
retailers  are not  paying the  gas  tax.   He questioned  if                                                                   
refiners are basing the charge  on the cost to bring gas from                                                                   
the Lower 48, how the money will be passed to consumer.                                                                         
Mr. Ruaro  added that the distributors  have a line  item for                                                                   
the  eight cent  a gallon  tax. The  line items  would be  on                                                                   
their  invoices  so  the  retailers   will  be  paying  less,                                                                   
allowing them  to pass the  savings on.  Representative  Gara                                                                   
projected that  the company selling  the gas to  the retailer                                                                   
will raise  their price by eight  cents prior to  selling it.                                                                   
Mr. Ruaro  thought that the  language of the  amendment would                                                                   
insure that the savings are passed on.                                                                                          
Representative Gara suggested  that retailers pay the gas tax                                                                   
so  the  savings  gets  back to  the  consumer.    Mr.  Ruaro                                                                   
disagreed and thought that the  saving would be passed on, to                                                                   
the consumer with  the help of an amendment.   Representative                                                                   
Gara wanted  to know  that the  disagreement  was based  on a                                                                   
study.    Mr.  Ruaro  stated  that  the  amendment  would  be                                                                   
sufficient, but it would not be  perfect.  The only guarantee                                                                   
in  the bill  is that  if we  do  not suspend  the tax,  then                                                                   
Alaskans will continue paying it.                                                                                               
6:24:27 PM                                                                                                                    
Vice-Chair Stoltze spoke to the  surcharge and questioned the                                                                   
effect on  businesses that did  not want to raise  prices. He                                                                   
had spoken  with some  business  owners in  favor of the  gas                                                                   
suspension because  even if it  did not result in  a savings,                                                                   
the business  owner might not  have to increase the  price or                                                                   
add a surcharge.                                                                                                                
6:26:27 PM                                                                                                                    
Co-Chair Chenault  wondered if the provision on  page 4, line                                                                   
25 is  new or in  existing law. Mr.  Ruaro observed  that the                                                                   
provision is  new and  is intended to  ensure the  savings is                                                                   
passed on to the consumer.                                                                                                      
Co-Chair  Chenault  noted that  the  Tesoro  refinery in  his                                                                   
district does  not benefit from  the high price of  oil. Most                                                                   
Kenai gas stations buy gas from Tesoro.                                                                                         
6:28:50 PM                                                                                                                    
Representative  Crawford  observed  that  competitive  market                                                                   
forces do  not exist in Alaska  outside of Anchorage.  He did                                                                   
not  think  an  eight  cent  tax   cut  would  be  passed  to                                                                   
6:30:39 PM                                                                                                                    
Representative Hawker stressed  that the overriding objective                                                                   
is efficient,  equitable, and effective legislation  and that                                                                   
benefits the consumer. He expressed  concern about moving the                                                                   
bill out too quickly.                                                                                                           
6:33:30 PM                                                                                                                    
Representative Thomas  questioned if the cap on  PCE would be                                                                   
Co-Chair  Meyer  agreed that  the  next  CS would  exhibit  a                                                                   
higher PCE cap.                                                                                                                 
Representative   Nelson  observed   that  Ms.  Meer   Kohler,                                                                   
President of (AVEC)  had communicated earlier  today that she                                                                   
supported raising the cap to $1.15.                                                                                             
Co-Chair Meyer  pointed out that  the provision has  a sunset                                                                   
and can be fine tuned in future years.                                                                                          
6:35:54 PM                                                                                                                    
Representative  Gara  observed  that  Alaska  is  paying  the                                                                   
highest gas prices in the nation,  even though refinery costs                                                                   
are not  the highest in the  nation, given the cost  they are                                                                   
paying for  oil. He offered to  present the study at  a later                                                                   
date,  which   he  had  been  referring  to   throughout  the                                                                   
committee  meeting  (analysis  by  Professor  Burman  at  the                                                                   
University of Alaska in Anchorage).                                                                                             
Co-Chair  Chenault expressed  concerns with  the gas  tax. He                                                                   
would like to see the high price  of gas be addressed in this                                                                   
bill as well.  Many Alaskans have  to commute to work, and he                                                                   
said that  it does  cost a  "small fortune"  to fill  up some                                                                   
6:38:23 PM                                                                                                                    
Representative  Kelly requested  that page  two, line  25, be                                                                   
changed  to "an electric  utility whose  customers receive  a                                                                   
power cost  subsidy under this  section."  He  suggested this                                                                   
to  eliminate  confusion that  "we  are  somehow in  the  PCE                                                                   
Ms. Armstrong stressed  that the mentioned section  is a work                                                                   
in progress. She  is working with her legal  drafting team to                                                                   
clear it  up.  Representative  Kelly suggested  a floor  or a                                                                   
date to prevent  driving the kWh cost below what  it has been                                                                   
for years.                                                                                                                      
Representative  Kelly noted concern  that in the  future, the                                                                   
Legislature will  be considered  less beneficial  and promote                                                                   
less self reliance than it appears.   He worried specifically                                                                   
about the  LIHEAP increase  and how that  will be  handled in                                                                   
the  future,  and he  worried  about  the total  amount  that                                                                   
eventually might be taken away  and the pain this might cause                                                                   
some  Alaskans.    He  encouraged  legislators  to  seriously                                                                   
consider programs that will be carried into the future.                                                                         
6:43:12 PM                                                                                                                    
Representative Gara asked about  the amendment process moving                                                                   
so  quickly.  Co-Chair Chenault  did  not  know if  it  would                                                                   
happen in  one day.  Representative  Gara requested  an extra                                                                   
day.  Co-Chair Chenault could not make that commitment.                                                                         
Representative  Crawford  asked  if the  Committee  would  be                                                                   
required  to submit  amendments tonight.   Co-Chair  Chenault                                                                   
offered to take amendments.                                                                                                     
6:45:11 PM                                                                                                                    
SARAH  FISHER-GOAD,  DEPUTY DIRECTOR  OF  OPERATIONS,  ALASKA                                                                   
ENERGY  AUTHORITY,  DEPARTMENT  OF  COMMERCE,  COMMUNITY  AND                                                                   
ECONOMIC DEVELOPMENT,  understood  that there were  questions                                                                   
regarding AVEC's need  for a loan for fuel  purchases vs. the                                                                   
bulk fuel revolving loan fund.                                                                                                  
Representative   Hawker  noted  that   he  had  raised   that                                                                   
question.   He hoped for a  round table discussion  with AVEC                                                                   
and Ms. Goad, with the goal of sorting the issue out.                                                                           
Co-Chair Meyer asked that there  be teleconference discussion                                                                   
between Ms. Fisher-Goad and AVEC.                                                                                               
Ms. Fisher-Goad understood that  AVEC had a loan requirement.                                                                   
The  question   was  whether  the  requirement   was  for  an                                                                   
amendment  for the  bulk  fuel revolving  loan  fund or  not.                                                                   
Because of the  loan amount needed, it will be  a $20 million                                                                   
dollar  loan  vs. our  $500  thousand  cap  for a  bulk  fuel                                                                   
revolving loan fund.   The fund has come in  to existence for                                                                   
smaller communities where typically  a borrower wouldn't have                                                                   
the ability  to ask a private  bank for a one year  loan. She                                                                   
offered to  work with the staff  to add the issue  outside of                                                                   
the  bulk fuel  program.  Representative  Hawker wanted  that                                                                   
question answered and to have AVEC testify.                                                                                     
6:49:55 PM                                                                                                                    
Representative   Gara  referenced   the  handout  from   AHFC                                                                   
regarding  the  question  of   how  to  maintain  the  rebate                                                                   
program, which AHFC had estimated at $60 million dollars.                                                                       
6:51:35 PM                                                                                                                    
Co-Chair Meyer requested that amendments be drafted for the                                                                     
next meeting.  He requested that all the players be present                                                                     
to answer the questions.                                                                                                        
HB 4005 was HEARD and HELD in Committee for further                                                                             

Document Name Date/Time Subjects