Legislature(2007 - 2008)HOUSE FINANCE 519

08/01/2008 09:00 AM FINANCE

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09:19:29 AM Start
09:20:27 AM HB4005
11:46:47 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                       August 1, 2008                                                                                           
                         9:19 A.M.                                                                                              
CALL TO ORDER                                                                                                                 
Co-Chair Meyer called the House  Finance Committee meeting to                                                                   
order at 9:19:29 AM.                                                                                                          
MEMBERS PRESENT                                                                                                               
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Harry Crawford                                                                                                   
Representative Richard Foster                                                                                                   
Representative Les Gara                                                                                                         
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Mary Nelson                                                                                                      
Representative Bill Thomas Jr.                                                                                                  
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative  Andrea  Doll; Representative  Bryce  Edgemon;                                                                   
Sarah  Fisher-Goad,  Deputy Director  of  Operations,  Alaska                                                                   
Industrial  Development  and   Export  Authority  and  Alaska                                                                   
Energy  Authority,  Department  of  Commerce,  Community  and                                                                   
Economic  Development; Amanda  Ryder,  Director, Division  of                                                                   
Administrative  Services, Department  of Commerce,  Community                                                                   
and Economic  Development; Clyde (Ed) Sniffen  Jr., Assistant                                                                   
Attorney General,  Department of  Law; Johanna Bales,  Deputy                                                                   
Director,  Tax  Division,  Department   of  Revenue;  Randall                                                                   
Ruaro,  Special Assistant,  Office of  the Governor;  Randall                                                                   
Ruaro,  Special  Assistant,  Office   of  the  Governor;  Ron                                                                   
Kreher,  Chief   of  Field   Services,  Division   of  Public                                                                   
Assistance,  Department   of  Health  and   Social  Services;                                                                   
Suzanne Armstrong, Staff, Representative Kevin Meyer                                                                            
PRESENT VIA TELECONFERENCE                                                                                                    
Meera  Kohler,   President  CEO,   Alaska  Village   Electric                                                                   
Cooperative;  Scott   Ruby,  Community  Development   Section                                                                   
Chief,  Division   of  Community   Advocacy,  Department   of                                                                   
Commerce, Community and Economic Development,                                                                                   
HB 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.                                                                   
          HB 4005 was HEARD & HELD in Committee for further                                                                     
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.                                                                         
9:20:27 AM                                                                                                                    
Co-Chair Meyer  initiated the discussion about  the bulk fuel                                                                   
revolving  loan fund.  He invited Sarah  Fisher Goad,  Deputy                                                                   
Director  of Operations,  Alaska  Industrial Development  and                                                                   
Export Authority  and Alaska Energy Authority,  Department of                                                                   
Commerce, Community  and Economic Development to  testify and                                                                   
welcomed   Meera  Kohler,  President   CEO,  Alaska   Village                                                                   
Electric Cooperative  via teleconference.  He requested  that                                                                   
all amendments be submitted by the end of the day.                                                                              
9:23:52 AM                                                                                                                    
Representative  Hawker asked Ms.  Kohler about her  expressed                                                                   
need  to add  $35  million dollars  into  the Revolving  Loan                                                                   
Fund.  His understanding  was  that Ms.  Fisher-Goad  thought                                                                   
that might  not be  necessary.   He asked  about gaps  in the                                                                   
state program  that might result in compromising  the ability                                                                   
to meet bulk fuel requirements for rural Alaska.                                                                                
9:25:16 AM                                                                                                                    
MEERA  KOHLER,   PRESIDENT  CEO,   ALASKA  VILLAGE   ELECTRIC                                                                   
COOPERATIVE  testified via teleconference.  She thought  that                                                                   
there was a  large demand for increased credit.  She had done                                                                   
some prior  brainstorming  to figure out  the exact  monetary                                                                   
need.    She provided  the  necessary  background.  The  fuel                                                                   
orders are about  15 percent behind those of last  year.  She                                                                   
believed that 100 million gallons  of fuel were delivered per                                                                   
year. She speculated that the  orders were behind because the                                                                   
villages could not afford additional  fuel, or that they were                                                                   
waiting for the price of fuel  to drop. The actual demand for                                                                   
fuel in communities is about 83  million gallons. The average                                                                   
cost  for  that  fuel is  $230  million,  with  higher  costs                                                                   
anticipated this  year. She anticipated the  difference to be                                                                   
$184 million.  She did not know  how the difference  would be                                                                   
made up.                                                                                                                        
She continued that between the  state's two managing programs                                                                   
there are only $13 million dollars  available for loans.  She                                                                   
theorized that if more money was  available, the demand would                                                                   
be greater  and more of the  fuel would be ordered  early and                                                                   
not need to be  flown in. She expressed concern  with the cut                                                                   
off dates, because she knew that  orders need to be placed by                                                                   
the  15   of August  in  order  for  delivery  by the  1   of                                                                   
October.   If the  cut off  day is missed,  then delivery  by                                                                   
barge is no longer  an option and the villages  will be faced                                                                   
with flying  in fuel.   She  stated that  the Alaska  Village                                                                   
Electric Cooperative  (AVEC) would like to borrow  money at a                                                                   
low interest rate.  She was concerned  about Cordova electric                                                                   
because they  buy fuel on a  month to month basis  from their                                                                   
local supplier.                                                                                                                 
9:29:00 AM                                                                                                                    
Representative  Hawker asked  Ms. Fisher-Goad  to respond  to                                                                   
Ms. Kohler's assertion  that prices have increased  and, as a                                                                   
result, fuel is not being ordered.                                                                                              
SARAH  FISHER-GOAD,  DEPUTY DIRECTOR  OF  OPERATIONS,  ALASKA                                                                   
INDUSTRIAL  DEVELOPMENT  AND   EXPORT  AUTHORITY  AND  ALASKA                                                                   
ENERGY  AUTHORITY,  DEPARTMENT  OF  COMMERCE,  COMMUNITY  AND                                                                   
ECONOMIC  DEVELOPMENT, noted  that there  are two issues  for                                                                   
the committee to consider:                                                                                                      
   ·    The need for credit to purchase fuel, which would                                                                       
        then be paid back by revenues coming into the                                                                           
   ·    Retailers in the communities sell the fuel for                                                                          
        residential use, which is part of the revenue for                                                                       
        the borrower to pay back.                                                                                               
She did  not know  how to  address the  two issues.  The bulk                                                                   
fuel  revolving loan  program  is not  there  to finance  the                                                                   
entire fuel needs  and purchases for an entire  community. It                                                                   
is limited  to smaller communities  of 2,000 people  or less.                                                                   
The larger communities would not  be eligible for the program                                                                   
as it  exists now. One  of the issues  is a discussion  about                                                                   
fuel needs and  how communities are paying for  the fuel that                                                                   
is not being sold in some type  of retail process versus what                                                                   
is needed  for credit  advancement and  for community  loans.                                                                   
Currently,  a handful  of communities  do borrow the  maximum                                                                   
amount. To ability for cooperatives  to purchase for multiple                                                                   
sights was  newly established  two years ago,  although there                                                                   
haven't been any  borrowers under that clause.  The limit now                                                                   
for multiple sights is $1.8 million.                                                                                            
9:32:25 AM                                                                                                                    
Representative  Hawker  did  not   hear  any  testimony  that                                                                   
indicated that an  individual or entity was not  able to meet                                                                   
their  fuel  requirements.  He  felt  that  both  testimonies                                                                   
offered  only anecdotal  information. He  repeated his  query                                                                   
regarding  the  mentioned  inability  of a  community  to  be                                                                   
served.   Ms.  Fisher-Goad replied  that, she  would like  to                                                                   
check with their  credit department to clarify.   She did not                                                                   
know of  specific loan  requests except  those requests  from                                                                   
9:34:19 AM                                                                                                                    
Representative Kelly encouraged  that the bill be broken down                                                                   
into three  parts.  First,  his understanding was  that under                                                                   
the current program,  there are enough funds  available.  Ms.                                                                   
Fisher-Goad  replied  yes, at  the  existing  amount, but  in                                                                   
conjunction  with  Mr.  Hawker's   questions  she  wanted  to                                                                   
clarify   with  her   credit   department.   Her  agency   is                                                                   
experiencing a "high traffic time".                                                                                             
Representative Kelly's  second question was whether  the high                                                                   
cost of fuel  encouraged any new "players" to  seek help. The                                                                   
third question  was what  the cost would  be if the  interest                                                                   
rate  was  separate.  He  asked if  the  interest  rate  were                                                                   
removed, would Ms. Kohler need the credit enhancement.                                                                          
Ms.  Kohler replied  that  the board  would  be approving  an                                                                   
increase in their  line of credit from $5 million  dollars to                                                                   
$15 million.   She stated that  that was not enough  for this                                                                   
year's fuel bill.                                                                                                               
Representative Kelly  asked if money  was needed now  for the                                                                   
current  program, because  of increased  costs of  fuel.   He                                                                   
asked "does AVEC need us to let  them in the door, and if so,                                                                   
what is the bill".                                                                                                              
9:38:14 AM                                                                                                                    
Ms.  Fisher-Goad  thought  Representative   Kelly's  approach                                                                   
would  be helpful.  With respect  to "new  players," her  big                                                                   
concern was  potential fuel cooperatives  that might  come in                                                                   
and ask for the  maximum amount.  The $1.8  million would put                                                                   
a strain  on the program  as it exists  now. She  stated that                                                                   
"that type  of borrower  hasn't come  into the program  yet,"                                                                   
but as  soon as they  do, it will be  a bigger strain  on the                                                                   
Representative Kelly was supportive,  because he did not want                                                                   
to see fuel  flown to the  remote areas.  He  favored helping                                                                   
to guarantee that the credit exists.                                                                                            
Ms.  Fisher-Goad  addressed that  flying  the  fuel into  the                                                                   
communities,  in  the  past,   concerned  issues  with  barge                                                                   
deliveries and was not a credit  issue, but rather logistical                                                                   
issue.   Her  understanding  was  that it  has  never been  a                                                                   
credit issue.                                                                                                                   
9:40:41 AM                                                                                                                    
Representative  Joule  asked   how  long  it  would  take  to                                                                   
consolidate  the  necessary  information.    Ms.  Fisher-Goad                                                                   
hoped to  do this  as soon as  the committee process  breaks.                                                                   
She hoped  she would  be able to  provide information  to the                                                                   
committee today.                                                                                                                
Representative Joule asked if  the small independents as well                                                                   
as   the  larger   utility  providers   would  receive   this                                                                   
information.   Ms. Fisher-Goad  stated that  she will  do her                                                                   
best to acknowledge  the borrowers that she has  on a regular                                                                   
basis; as  well as exploring any  new borrowers.   She wanted                                                                   
to  contact a  few other  agencies and  explore their  credit                                                                   
Representative  Joule  informed   that,  in  the  past,  some                                                                   
communities  in his  district have  run out  of fuel  because                                                                   
they didn't have  enough money. To fly the fuel,  they had to                                                                   
pay 12  dollars per  gallon. He  appreciated the turn  around                                                                   
time, because once  this session ends, so does  the mechanism                                                                   
to act.                                                                                                                         
9:43:30 AM                                                                                                                    
Ms. Kohler interjected that Rural  Alaska Fuel Services serve                                                                   
about 17 or  18 communities with the bridge  loan program and                                                                   
those  communities  are  ordering  less  fuel  for  the  same                                                                   
dollars.  There is  a  need for  those  participating in  the                                                                   
bridge loan program that is not being met.                                                                                      
Representative  Hawker asked  Ms. Fisher-Goad  if the  bridge                                                                   
loan program  was under  her jurisdiction.   Ms.  Fisher-Goad                                                                   
answered  that the  bridge loan  program is  a Department  of                                                                   
Commerce and  Community and Regional  Affairs program.   That                                                                   
program  is for borrowers  who  do not qualify  for the  bulk                                                                   
fuel  revolving loan  program.  It is  a  three year  program                                                                   
where borrowers  can build up credit.   Representative Hawker                                                                   
clarified that the  program is not under the  jurisdiction of                                                                   
Ms Fisher-Goad, so this point must also be discussed.                                                                           
9:45:13 AM                                                                                                                    
Representative Nelson referenced  three letters in her packet                                                                   
addressing  energy concerns.  One was  a resolution  from the                                                                   
city of Napaskiak,  stating that their electric  coop uses 60                                                                   
thousand  gallons  per  year.   For  2007  that  amount  cost                                                                   
$184,000.    A purchase  order  for  2008,  for the  same  60                                                                   
thousand  gallons is  $278,000.  The city  is very  concerned                                                                   
about  how  they  and  their   residents  will  afford  these                                                                   
increased prices.   She believed  that these letters were not                                                                   
anecdotal. The  AFN had five bullet points  which recommended                                                                   
that  the Legislature  help to  buy  down the  debt of  rural                                                                   
utilities  in order to  reduce cost  passed on to  consumers.                                                                   
The third letter  is from Del Conrad who does  administer the                                                                   
bridge loan program stating that,  "given the increased cost,                                                                   
the  bulk  fuel loan  funds  should  be increased  from  $2.7                                                                   
million to $5 million."                                                                                                         
9:47:59 AM                                                                                                                    
Representative Gara summarized  the discussion. He understood                                                                   
that the cost of  diesel will probably go up  to nine dollars                                                                   
per gallon.  He stated  that the  cap on  the amount  of loan                                                                   
money available hasn't  changed, and with the  rising cost of                                                                   
fuel, there might  be a problem in getting  fuel shipments to                                                                   
rural Alaska. He  questioned if AVEC was trying  to make more                                                                   
credit available to their members.  Ms. Kohler explained that                                                                   
AVEC purchases the  fuel themselves for all  of the utilities                                                                   
for 53  villages, and  she was not  actively asking  for help                                                                   
there.    The potential  problems  would  not  surface  until                                                                   
later, and  that was her  main concern.   She wanted  to make                                                                   
sure the  state was prepared with  a pool of  money available                                                                   
to draw  upon, in the event  of emergency declarations.   The                                                                   
electricity for AVEC's villages  was not in jeopardy, but she                                                                   
was concerned that the bulk fuel  needs for a number of small                                                                   
villages was.                                                                                                                   
9:51:04 AM                                                                                                                    
Representative Gara  asked about the fuel delivery  issue for                                                                   
the  winter.  He suggested  that  if  the problem  cannot  be                                                                   
quantified, then give the cooperatives  the loan money to buy                                                                   
the fuel, allowing the loan to  be paid back.  He asked about                                                                   
the risk  of increasing the  cap.  Ms. Fisher-Goad  responded                                                                   
that  there are  a  couple issues,  regarding  Representative                                                                   
Gara's  comments.  She  explained  that  while  there  was  a                                                                   
portion of  bulk fuel  loan money that  was paid  back, there                                                                   
was another  portion used for  the communities' needs,  and a                                                                   
portion used for the utility.   The utility is based upon the                                                                   
rates charged to the rate payers.  With respect to the retail                                                                   
portion  versus   communities'  needs,  there   may  be  some                                                                   
additional information necessary.  She thought that many bulk                                                                   
fuel  loan payments  were  from  other revenue  sources.  The                                                                   
concern,  therefore, might  not be in  loan eligibility,  but                                                                   
instead,  in the ability  to pay  back the  money within  the                                                                   
Ms. Fisher-Goad  mentioned the letter read  by Representative                                                                   
Nelson from the  village of Napaskiak, explaining  that those                                                                   
costs will  need to  be passed  on to the  rate payers.   She                                                                   
stated that  the ability to  provide loans to  communities is                                                                   
only one small part of the issue.                                                                                               
Ms. Kohler  suggested that  a working  group be assembled  to                                                                   
discuss the issue,  and through comparison, identify  the gap                                                                   
and find solutions to bridge it.                                                                                                
9:55:33 AM                                                                                                                    
Representative Kelly  commented on the  lack of time  left in                                                                   
special  session to  entertain such  requests. He  speculated                                                                   
that the discussion was becoming too broad.                                                                                     
Representative  Gara stressed  time consideration.  He wanted                                                                   
to know the real  need in the communities and  make sure that                                                                   
they  got  fuel,  despite  any   shortcomings  of  the  state                                                                   
agencies.  He hoped that AEA would  reach out to the affected                                                                   
communities to determine a proposal.                                                                                            
Representative Nelson  commented that there should  have been                                                                   
a working group already established.   She was concerned that                                                                   
there are  a number of  villages seeing sky-rocketing  prices                                                                   
in communities  that do not  have economists or  lobbyists at                                                                   
their disposal.   The  state should be  their advocate.   The                                                                   
state  agency that  provides these  loans should  be able  to                                                                   
estimate  the   need.  She  opined   that  loans   should  be                                                                   
determined and  it ought  to be a  question that  is answered                                                                   
quickly.  The question  should  be answered  today, when  the                                                                   
amendments  are due.   Co-Chair Meyer  agreed that  there was                                                                   
not time for a working group.  Representative Gara concurred.                                                                   
9:59:10 AM                                                                                                                    
Representative  Joule commented on  his frustration  with the                                                                   
needs of  rural Alaska  being addressed  inadequately  by the                                                                   
department.  Additionally, there  is the issue of making sure                                                                   
that the communities have fuel.  He pointed out the number of                                                                   
school districts  left out of  the PCE program.  Expenses for                                                                   
the school districts are increasing as well.                                                                                    
Representative Kelly asked what  tools the administration has                                                                   
to address these issues.  He asked  if there was an emergency                                                                   
fund or  supplemental budget available  during the  time that                                                                   
the legislature  is out of  session. Co-Chair  Meyer informed                                                                   
that the  supplemental budget  for next  March will  not make                                                                   
fuel available for this September.                                                                                              
Representative Hawker  agreed that a supplemental  next March                                                                   
will not get  the fuel needed this September.  He warned that                                                                   
the issue of  bulk fuel was "beyond paramount."   He asserted                                                                   
that the issue has been overlooked.  He thought that it rests                                                                   
with   Department  of   Commerce,   Community  and   Economic                                                                   
10:04:45 AM                                                                                                                   
SCOTT RUBY, COMMUNITY DEVELOPMENT  SECTION CHIEF, DIVISION OF                                                                   
COMMUNITY  ADVOCACY, DEPARTMENT  OF  COMMERCE, COMMUNITY  AND                                                                   
ECONOMIC DEVELOPMENT  testified via teleconference,  that one                                                                   
of the  programs that  the division  is in  charge of  is the                                                                   
bulk fuel  bridge loan  program, which  provides funding  for                                                                   
communities that cannot finance  their fuel through any other                                                                   
means.   Currently, that loan  fund is $2.3 million  dollars.                                                                   
He had identified the additional  need to be $2.7 million for                                                                   
this year to  fund communities that will not  qualify through                                                                   
other lenders.                                                                                                                  
Mr. Ruby  stated that currently,  16 communities  have bridge                                                                   
loans; several  others have  contacted our contractor,  Rural                                                                   
Alaska  Fuel Services  indicating that  they may  or may  not                                                                   
need a  fuel loan from the  department. Until  the department                                                                   
has completed applications, they  are not really aware of the                                                                   
funding needs.  Some communities  are still attempting to get                                                                   
prices  from  the  fuel  companies.  He  agreed  that  it  is                                                                   
important to  provide financing  for communities  to purchase                                                                   
fuel to  support the  residents and  the infrastructure.   If                                                                   
fuel remains so  expensive can anyone afford to  pay the fuel                                                                   
provider and repay their loans?                                                                                                 
10:08:54 AM                                                                                                                   
Representative  Hawker  referenced  the $2.7  million  dollar                                                                   
number.   He  asked   if  it   had  been   included  in   the                                                                   
appropriation bills.  Mr. Ruby  did not know.  Representative                                                                   
Hawker  was  speechless.  He  asked  if  the  department  was                                                                   
operating in crisis mode.                                                                                                       
10:10:36 AM                                                                                                                   
Representative Nelson agreed with  Representative Hawker. She                                                                   
did not think that the $2.7 million  had been included in any                                                                   
of the bills.                                                                                                                   
Representative  Gara asked  if  the credit  limits were  high                                                                   
enough to  deal with  the 40%  increase in  the cost  of fuel                                                                   
this winter. He asked Mr. Ruby's  opinion about whether those                                                                   
needed to be changed.                                                                                                           
Mr. Ruby  agreed that there was  a need to expand  the credit                                                                   
limits. It  is unlikely that  the need would  exceed $750,000                                                                   
per community.                                                                                                                  
Representative   Gara  emphasized  that   there  is   a  time                                                                   
constraint  in solving  this problem.  He requested that  Mr.                                                                   
Ruby work  with others to come  up with a policy  proposal to                                                                   
address the issue  immediately. Both the head of  AEA and the                                                                   
Commissioner  of DCED  need to  be involved  in tackling  the                                                                   
problem.  He  was  frustrated  with the  lack  of  action  to                                                                   
address the problem.                                                                                                            
10:14:56 AM                                                                                                                   
Representative  Nelson  said   just  because  we  expand  the                                                                   
program doesn't mean that people  will apply for those loans.                                                                   
Representative Kelly noted that time is running out.                                                                            
AMANDA RYER,  DIRECTOR, DIVISION OF ADMINISTRATIVE  SERVICES,                                                                   
DEPARTMENT OF  COMMERCE, COMMUNITY AND ECONOMIC  DEVELOPMENT,                                                                   
observed that  the Administration is working  on an amendment                                                                   
for the bridge loan program.                                                                                                    
Representative Nelson suggested  the Bulk Fuel Revolving Loan                                                                   
would  also need an  increase.  To receive  a Bridge Loan  an                                                                   
applicant must first  apply for the Bulk Fuel  Revolving Loan                                                                   
Fund.   She  maintained   that   many   villages  are   being                                                                   
Ms. Ryder observed that $2 million  will also be appropriated                                                                   
from the general fund for the  Bulk Fuel Revolving Loan Fund.                                                                   
10:18:42 AM                                                                                                                   
Vice-Chair Stoltze expressed confusion  regarding the role of                                                                   
the "energy  czar", Mr. Haagenson.  He had expected  that Mr.                                                                   
Haagenson would be the "point man" on key energy issues.                                                                        
Ms. Fisher-Goad  recalled that  Mr., Haagenson had  testified                                                                   
earlier in the special session.  He is the Energy Coordinator                                                                   
as well as Executive Director  of the Alaska Energy Authority                                                                   
(AEA).  He  is  the  appropriate  person  to  address  policy                                                                   
questions. Mr.  Haagenson is working  to develop  a long-term                                                                   
energy plan.                                                                                                                    
10:24:11 AM                                                                                                                   
Vice-Chair Stoltze  reiterated concerns that  Mr. Haagenson's                                                                   
presence has not been strong.  He asserted that Mr. Haagenson                                                                   
should  have been  the  person who  put  together a  cohesive                                                                   
Representative  Gara  asked  Ms.  Ryder  if  there  might  be                                                                   
additional  funds  to capitalize  the  bridge  and bulk  loan                                                                   
funds.  He  asked  about  the  cap on  the  fund.  Ms.  Ryder                                                                   
explained the $500 thousand dollar cap on the loans.                                                                            
Representative Gara voiced frustration  with the AEA program.                                                                   
His complaint was  that the AEA is so focused  on a long term                                                                   
plan that they are not addressing day to day issues.                                                                            
Co-Chair  Meyer reminded  the committee  of the other  issues                                                                   
that would be discussed today.                                                                                                  
10:26:57 AM                                                                                                                   
Representative  Hawker  understood  that  the  administration                                                                   
realizes that there are issues  that need to be resolved.  He                                                                   
associated himself with the ramblings  of Vice-Chair Stoltze.                                                                   
When  the special  session commenced,  he  queried about  the                                                                   
larger issue regarding the entirety  of the issues. He wanted                                                                   
to discuss the policy with Mr.  Haagenson, as well. He stated                                                                   
that  it was  his  understanding that  Mr.  Haagenson was  on                                                                   
vacation during  special session,  thereby putting  his needs                                                                   
above those of the state of Alaska.   He regarded this action                                                                   
as  "management  by  crisis."  He  recommended  an  oversight                                                                   
hearing  in the  state. He  recalled  the legislature  asking                                                                   
that the energy  issues be taken up in the early  summer, but                                                                   
the administration declined. He  claimed that the members are                                                                   
set  up  with  five  hours to  resolve  what  has  just  been                                                                   
identified as the  question. It is not a  deliberate process.                                                                   
He  wanted the  departments to  be aware  that the  committee                                                                   
must have their amendments in today by 4:00 pm.                                                                                 
10:30:12 AM                                                                                                                   
Co-Chair Meyer thought  the amendments should be  made to the                                                                   
appropriation  bill. He did  not know  that changing  the cap                                                                   
would  fall  under this  call;  he  believed  that it  was  a                                                                   
statutory  change.  He  acknowledged   that  the  process  is                                                                   
Representative Nelson  pointed out that the  legislators have                                                                   
had  different   attitudes  regarding   the  roll   that  the                                                                   
administration   takes.   She   acknowledged   that   it   is                                                                   
frustrating.   She asked about  the prepaid meters.  The cost                                                                   
would be $80 thousand dollars  to purchase the prepaid meters                                                                   
depending on the size of a village.   It is a good tool.  The                                                                   
residents are allowed  to prepay their power cost  as well as                                                                   
pay down  any debt.   A letter  from Mr. Haagenson  responded                                                                   
that the request for the prepaid  meter does not fit under HB                                                                   
152. She  expressed understanding  that  the request  did not                                                                   
comport with the  requirements in the renewable  energy fund.                                                                   
She asked for a 50/50 match for  those communities interested                                                                   
in the power  set meters, which would help  bring down usage.                                                                   
She  asked if  the  department  would favor  the  legislature                                                                   
funding the power set meters.   She feared, for the bulk fuel                                                                   
component that January will be  too late.  She added that her                                                                   
question to  the administration regarding the  prepaid meters                                                                   
was as stand alone legislation, not as part of HB 152.                                                                          
Ms.  Fisher-Goad stated  that  the intention  was to  clarify                                                                   
that the  request  could not be  evaluated  under the HB  152                                                                   
process.   There have  been grants  managed for utilities  to                                                                   
provide the meters.  She offered  to work with Representative                                                                   
Nelson with respect  to which utilities would  be looking for                                                                   
specific grants and what the cost would be.                                                                                     
10:34:55 AM                                                                                                                   
Representative  Nelson commented on  the senate package.  She                                                                   
wanted  to know  which version  the administration  supports;                                                                   
each has different variables.                                                                                                   
Vice-Chair  Stoltze commented  that  if the  bulk fuel  issue                                                                   
does not fit into this call, the  legislature should pass the                                                                   
bill and add another  call. He suggested that if  an issue is                                                                   
identified   that   has  serious   ramifications,   let   the                                                                   
administration  know that  the  legislature  wants this  call                                                                   
amended as part of a responsible energy package.                                                                                
Co-Chair Chenault  sought clarification  regarding  the issue                                                                   
at hand.                                                                                                                        
10:37:10 AM                                                                                                                   
Co-Chair  Chenault recalled  that the  original plan  did not                                                                   
include   PCE.  He   had  not   seen  any   bills  from   the                                                                   
administration  addressing PCE  or LIHEAP.   The issues  have                                                                   
been brought  forth by the  legislature.  He  encouraged that                                                                   
the  ideas  be  heard.  During   the  budget  process,  every                                                                   
department  is represented.  He  warned that  issues must  be                                                                   
addressed in a timely manner.  The department has been poorly                                                                   
represented during this special session.                                                                                        
10:39:44 AM                                                                                                                   
Representative Gara noted the  electrical portion of the bill                                                                   
involving a  credit to  each utility of  five cents  per kWh.                                                                   
He  had received  concerns  that  those  who rent  might  not                                                                   
receive any  benefit. He asked  if the intent  language could                                                                   
help to pass the saving to the renters.                                                                                         
Ms. Fisher-Goad  responded  that they  would need to  inquire                                                                   
from utilities on  how to categorize single  meter and multi-                                                                   
family housing.   The nickel credit for the  non PCE eligible                                                                   
communities is targeted to residential.   She wanted to speak                                                                   
with  the Alaska  Housing Finance  Corporation (AHFC)  first.                                                                   
She  asked   Representative  Kelly   to  add  any   available                                                                   
10:42:46 AM                                                                                                                   
Representative Gara responded  that it made sense to give the                                                                   
benefits to everyone in some form of "rough justice."                                                                           
Representative  Kelly pointed  out that a  single meter  on a                                                                   
multi-unit building  is categorized  as commercial  and would                                                                   
not qualify for the rebate.                                                                                                     
Co-Chair Meyer  moved the agenda  along to the  motor vehicle                                                                   
tax and  how it  would be  implemented. How  would the  eight                                                                   
cent tax savings be passed on to the consumer?                                                                                  
10:45:14 AM                                                                                                                   
Representative Gara was concerned  that much of the tax would                                                                   
not be  passed along to the  consumers. His concern  was that                                                                   
the  refineries  would  not  pass   the  savings  on  to  the                                                                   
CLYDE   (ED)  SNIFFEN   JR.,   ASSISTANT  ATTORNEY   GENERAL,                                                                   
DEPARTMENT  OF LAW,  explained that  the tax  is paid by  the                                                                   
retailer,  as part  of  the bill  paid  to  the refiner.  The                                                                   
opportunity to refrain from passing  on the savings lies with                                                                   
the retailer and not the refiner.                                                                                               
10:48:53 AM                                                                                                                   
JOHANNA BALES,  DEPUTY DIRECTOR, TAX DIVISION,  DEPARTMENT OF                                                                   
REVENUE,  affirmed   that  Mr.   Sniffen  was  correct.   She                                                                   
explained how the  fuel tax is passed along  to the consumer.                                                                   
The concern is  with the retail level because the  tax is not                                                                   
separately identified  on any  receipt for the  consumer. The                                                                   
refineries can set own their prices.                                                                                            
Co-Chair Meyer  asked Mr. Sniffen about his  ideas concerning                                                                   
the gas tax  benefit reaching the consumers with  the help of                                                                   
an  amendment. Mr.  Sniffen was  working to  ensure that  the                                                                   
eight cent  tax makes  it onto  the gas  pump. He planned  to                                                                   
introduce an amendment later in  the day. The first amendment                                                                   
included   several  different   concepts.   It  required   an                                                                   
affidavit by the retail gas station  that they had posted the                                                                   
tax amount at the pump. The amendment  would also include the                                                                   
authority to  audit to determine  whether or not  those costs                                                                   
have been passed  on to consumers. The last  component of the                                                                   
amendment  would allow  a retail  gasoline  station owner  to                                                                   
post a sign on  their premises or on the pump  informing that                                                                   
they  have made  a  pledge to  pass on  this  savings to  the                                                                   
consumers.   This would also  increase public  awareness that                                                                   
the tax had  been suspended, and promote competition  to make                                                                   
sure the savings were passed along.                                                                                             
10:53:33 AM                                                                                                                   
Representative Hawker said that  Ms. Bales is exactly correct                                                                   
about  how  the   tax  works.  What  is  not   mechanical  is                                                                   
establishing the  rate making process at the  gas pump. There                                                                   
is nothing  in this legislation  to stop the  wholesaler from                                                                   
raising their  prices to  compensate for  the eight  cent tax                                                                   
disappearing. Merchants  who are  higher on the  supply chain                                                                   
will all have the opportunity  to take advantage of the lower                                                                   
price  to increase  their own  profits.  Experience in  other                                                                   
states  shows an  inefficiency factor  of 20  to 40  percent.                                                                   
This could be a  form of corporate welfare. It  would be more                                                                   
efficient  to come  up with  other ways  to directly  provide                                                                   
10:58:08 AM                                                                                                                   
Mr. Sniffen agreed  that we need to rely on  market forces to                                                                   
regulate prices,  because it is too difficult  for government                                                                   
to   do  that.   He  understood   and   appreciated  all   of                                                                   
Representative Hawker's concerns.                                                                                               
RANDALL  RUARO, SPECIAL  ASSISTANT, OFFICE  OF THE  GOVERNOR,                                                                   
said  there  is  a middle  ground  that  the  amendment  will                                                                   
attempt  to achieve between  sole reliance  on market  forces                                                                   
and complete regulation to ensure  that the savings will pass                                                                   
through. If  there is a  retailer or distributor  who doesn't                                                                   
pass the savings through, they will lose business.                                                                              
Co-Chair  Meyer  agreed that  the  competition  in the  urban                                                                   
areas will mean that the market forces will be effective.                                                                       
11:00:49 AM                                                                                                                   
Representative      Gara       expressed      that      where                                                                   
there  is  a  competitive  market,   the  savings  will  pass                                                                   
through. The best way to help  may be to add the money to the                                                                   
electricity rebate.  This is a  way to ensure that  the money                                                                   
gets to  the consumers  and is  not taxable.  People in  non-                                                                   
state housing may  not receive the benefits  if the landlords                                                                   
don't pass  the savings along.  There is  no way to  make the                                                                   
gas station owners  pass the savings to the  consumers. There                                                                   
is no way for  them to know what the mathematical  formula is                                                                   
for passing the savings along.                                                                                                  
11:04:52 AM                                                                                                                   
Co-Chair  Meyer suggested  that there  are other benefits  to                                                                   
the eight cent suspension that  have not been brought up. One                                                                   
possible benefit  might be for the public transit  system and                                                                   
the prices that are charged.                                                                                                    
JERRY   BURNETT,   DIRECTOR,   DIVISION   OF   ADMINISTRATIVE                                                                   
SERVICES,   DEPARTMENT   OF  REVENUE,   noted   that   public                                                                   
transportation is not charged the tax.                                                                                          
Co-Chair Meyer  explained that  he had been in  communication                                                                   
with the trucking industry.  Apparently,  they intend to pass                                                                   
the  savings on  as part  of the  cost that  they charge  for                                                                   
shipping goods, which will ultimately affect the consumer.                                                                      
Mr.  Burnett   described  anecdotal   evidence  that   a  tax                                                                   
suspension does  benefit the consumer  by referencing  a time                                                                   
in the 1990s when aviation fuel  tax was suspended in Alaska,                                                                   
and the plan was successful.                                                                                                    
11:06:59 AM                                                                                                                   
Vice-Chair Stoltze  believed that  even the small  businesses                                                                   
without local  competition would want  to pass savings  on to                                                                   
the  consumer. The  penalties  will not  accomplish much.  He                                                                   
recommended  reducing  the tax  and  allowing  the market  to                                                                   
RANDALL  RUARO, SPECIAL  ASSISTANT, OFFICE  OF THE  GOVERNOR,                                                                   
noted  there  are  key sectors  that  contribute  greatly  as                                                                   
taxpayers. Many Alaskans purchasing  fuel will benefit from a                                                                   
tax suspension.   Building contractors  who purchase  fuel to                                                                   
build highways will benefit from  a gas tax suspension. There                                                                   
are unseen  benefits to suspending  the gas tax  that benefit                                                                   
specific segments of the economy.                                                                                               
11:09:40 AM                                                                                                                   
Representative  Crawford   commented  that  if   there  is  a                                                                   
reliance on  markets then  those markets  will not  allow the                                                                   
retailers to  charge more  than what it  can bear.   The only                                                                   
guarantee that  the money  will go to  those paying  the tax,                                                                   
would be  to issue a  tax rebate.   Otherwise, if the  tax is                                                                   
reduced,  the eight  cents will  get engulfed  in the  market                                                                   
stream. He  asserted that a rebate  would be the only  way to                                                                   
ensure that the  people who pay the tax receive  the benefit.                                                                   
Mr. Ruaro affirmed  that a savings pass through  could not be                                                                   
guaranteed. There  is the market effect addressed  earlier by                                                                   
Mr. Sniffen.                                                                                                                    
Representative Crawford  thought we would see  similar prices                                                                   
at  various  service  stations.  The fuel  stations,  in  his                                                                   
experience, choose  a price that the market will  bear on any                                                                   
particular day.   Co-Chair  Meyer noticed subtle  differences                                                                   
among retailer's  prices.  Representative  Crawford clarified                                                                   
that he did not mention Costco  which has a different pricing                                                                   
structure.  All  the  other fuel  stations  choose  the  same                                                                   
price.  Co-Chair Meyer pointed  out that the consumer will go                                                                   
to the  lowest priced station.  He believed that  the savings                                                                   
will be passed on.                                                                                                              
11:13:31 AM                                                                                                                   
Representative  Hawker  echoed  concerns with  achieving  the                                                                   
goal of  the proposed gas  tax suspension. He  indicated that                                                                   
rural  Alaska has  been hit  with high  utility costs;  South                                                                   
Central is  different and  has been impacted  by the  cost of                                                                   
gas.   He thought  that was the  unresolved challenge  of the                                                                   
package before  the committee.   All citizens  should benefit                                                                   
from the  wealth of the  state. The legislature  must address                                                                   
the inflating costs of motor fuel.  He reiterated his concern                                                                   
with  the   eight  cent   tax  suspension   plan's   lack  of                                                                   
11:17:27 AM                                                                                                                   
Representative   Nelson  requested   the  finance   committee                                                                   
address  the utility  needs of  rural  school districts.  The                                                                   
issue  is  for  future  contemplation,   but  she  wanted  to                                                                   
introduce  the issue,  as  it was  brought  to her  attention                                                                   
recently.  A  request  for  actual   energy  costs  for  FY09                                                                   
included heating oil costs, electricity  costs, and sewer and                                                                   
water costs. A projection of estimated  costs for each school                                                                   
district, and  a comparison of  costs to see  if supplemental                                                                   
needs  might be  there for  the legislature  to address.  She                                                                   
wanted to  bring this forward  on behalf of the  rural school                                                                   
districts and their exorbitant costs.                                                                                           
Representative  Hawker   pointed  out  that,   commencing  in                                                                   
January,  legislation was  passed convening  a commission  to                                                                   
evaluate a solution to the district  cost factor.  The energy                                                                   
cost is a specific  issue that will be addressed  by the task                                                                   
force  to address  the long  term  issue of  disproportionate                                                                   
energy cost to rural schools.                                                                                                   
11:20:03 AM                                                                                                                   
Representative Gara  commented on the proposed  flat payment.                                                                   
His concern  was that  if a  person received  a one  thousand                                                                   
dollar check once,  they might expect it again.  Some suggest                                                                   
that  the  increasing  permanent  fund  dividend  (PFD)  will                                                                   
minimize those  expectations. Instead  of issuing  a separate                                                                   
payment, the  additional amount  could be  added to  the PFD,                                                                   
because it is  accepted that the amount can  change from year                                                                   
to year.                                                                                                                        
Representative  Thomas  commented  on  motor  fuel  tax.  The                                                                   
Alaska Truckers  Association (ATA)  has complained  about the                                                                   
cost of  moving freight around the  state.  He has  not heard                                                                   
support for  the eight cent  tax suspension from  that group.                                                                   
He  opined that  businesses should  not be  exempt from  PCE.                                                                   
Those  savings will  go immediately  back  to the  consumers.                                                                   
Co-Chair  Meyer  commented that  it  would  also be  hard  to                                                                   
determine whether  the business would pass the  savings on to                                                                   
the consumer.  Representative  Thomas responded that a shrewd                                                                   
consumer,  one that is  searching for  the best price,  would                                                                   
know if the business is passing on the savings.                                                                                 
11:24:32 AM                                                                                                                   
Co-Chair Chenault  stated that is not only  the energy rebate                                                                   
that might  generate questions as  to why it is  not received                                                                   
each year,  but also  the three  gallon ceiling  on the  home                                                                   
heating fuel when that program  is no longer in effect.  Each                                                                   
of  the  programs  will  end  up  being  long-term.  Anything                                                                   
enacted today, will be subject to reversal.                                                                                     
11:26:26 AM                                                                                                                   
Representative  Joule agreed  that  there is  some cause  for                                                                   
concern, however,  the weatherization  program as  created by                                                                   
the legislature, with the rebate  could drive and reduce some                                                                   
of the  costs.   There is  the risk  that there  might be  an                                                                   
expectation,   however,  it  is   also  important   that  the                                                                   
legislature  take credit for  the good  things that  they do.                                                                   
The  legislature  will take  a  considerable  amount of  time                                                                   
dealing with  long term issues.   He was less  concerned that                                                                   
some of  the programs would  continue to be implemented  than                                                                   
he  was   in  the  widespread   interest  in   renewable  and                                                                   
alternative plans for energy.   He cautioned over reaction of                                                                   
the  high  costs  of  long  term   plans.    Alaska  has  the                                                                   
opportunity to look into renewable  and alternative energy to                                                                   
proactively guide the state without fearing the cost.                                                                           
11:30:15 AM                                                                                                                   
Co-Chair  Meyer  commented on  the  version of  the  "omnibus                                                                   
bill"  put forward  by the Senate.  He liked  the Low  Income                                                                   
Home Energy Assistance Program  (LIHEAP) because it helps the                                                                   
low income  people. The  senate is  proposing that  the state                                                                   
pay for any amount over three  dollars per gallon. He did not                                                                   
agree with the proposal, as it  would encourage the seller to                                                                   
mark  up the  prices  knowing  that the  state  will pick  up                                                                   
anything over three dollars. The  committee had opted to bump                                                                   
up the amount received.                                                                                                         
RON  KREHER, CHIEF  OF  FIELD  SERVICES, DIVISION  OF  PUBLIC                                                                   
ASSIATANCE,  DEPARTMENT   OF  HEALTH  AND   SOCIAL  SERVICES,                                                                   
referenced  the heating  assistance program  and stated  that                                                                   
the greatest  challenge  was addressing  the growing  cost of                                                                   
fuel for heating homes. Under  the LIHEAP program alone, many                                                                   
needs to assist with heating costs  were not met. Raising the                                                                   
income limits  would not have  been his first  choice because                                                                   
of the  challenge of meeting the  needs of the  lowest income                                                                   
families. Two thirds  of those served now by  LIHEAP are less                                                                   
than  100 percent  of poverty.  If the  opportunity to  serve                                                                   
families  at  225 percent  of  the  poverty level  will  also                                                                   
benefit  low income  working  families,  then  the effort  is                                                                   
laudable and one he is interested in implementing.                                                                              
11:35:08 AM                                                                                                                   
Representative  Gara asked for  the comparative  cost between                                                                   
the fuel proposals on the senate  side versus the cost of the                                                                   
proposal  at   hand.  Co-Chair  Meyer  understood   that  was                                                                   
approximately $200  million dollars.  Mr. Kreher  stated that                                                                   
the amount  would be about  $20 million dollars  to implement                                                                   
the provisions  in the house  bill. Co-Chair Meyer  corrected                                                                   
that the total was $40 million.                                                                                                 
Representative  Gara thought  that  the  two components  were                                                                   
each $75 million  dollars.  He wondered if  an additional $20                                                                   
million would  be enough  to extend  the program. Mr.  Kreher                                                                   
explained  that as  income limits  are increased,  households                                                                   
receive less money.                                                                                                             
Representative  Gara asked if  the money  added by  the state                                                                   
was  only for  those above  the  federal limit.   Mr.  Kreher                                                                   
answered that  the requested funding  would serve  the entire                                                                   
population  from  0 percent  of  income  up to  225  percent.                                                                   
Representative Gara liked LIHEAP  because he believed that it                                                                   
was fair because it applies to all communities.                                                                                 
11:38:33 AM                                                                                                                   
Co-Chair Meyer recounted the point  system. Mr. Kreher stated                                                                   
that the heating assistance program  is driven by a series of                                                                   
points.    The  urban  areas  tend  to  get  fewer  of  these                                                                   
community  heating cost  points.  The points  are derived  by                                                                   
climactic   conditions   and   heating  degree   days,   etc.                                                                   
Representative Hawker  reported at previous meeting  that the                                                                   
final  benefit for  Anchorage  was too  low.  The report  was                                                                   
incorrect and  as a result  was rerun  to come to  the proper                                                                   
Representative Gara requested  the correct number. Mr. Kreher                                                                   
explained that the  report dropped off the first  four digits                                                                   
of the  number, and  the correct number  was indeed  over one                                                                   
million dollars as opposed to forty four thousand dollars.                                                                      
11:43:38 AM                                                                                                                   
SUZANNE   ARMSTRONG,  STAFF,   REPRESENTATIVE  KEVIN   MEYER,                                                                   
discussed the  changes made by the Senate  Finance Committee.                                                                   
The  major change  is in  the  calculated floor  for the  PCE                                                                   
portion of the bill.  The senate  has calculated the floor at                                                                   
a lower amount.                                                                                                                 
Representative Gara asked the  fiscal note of the two bodies.                                                                   
Co-Chair Meyer assured that raising  the ceiling and lowering                                                                   
the floor  would create a  higher fiscal note.  Ms. Armstrong                                                                   
notified that Mr. Teal was preparing a comparison.                                                                              
11:45:13 AM                                                                                                                     
HB 4005 was HELD in Committee for further consideration.                                                                        
11:46:47 AM                                                                                                                   
The meeting was adjourned at 11:46 AM                                                                                           

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