Legislature(2007 - 2008)SENATE FINANCE 532
03/29/2008 10:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB233 | |
| HB 233 | |
| HB373 | |
| HB19 | |
| HB75 | |
| HB338 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 19 | TELECONFERENCED | |
| + | HB 75 | TELECONFERENCED | |
| + | HB 373 | TELECONFERENCED | |
| + | HB 338 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | HB 233 | ||
CS FOR HOUSE BILL NO. 338(FIN)
"An Act relating to the bulk fuel bridge loan fund and
program, power project fund, and the bulk fuel
revolving loan fund; authorizing the Alaska Energy
Authority to borrow money from the power project fund
for the bulk fuel revolving loan fund and to repay
money borrowed; and
REPRESENTATIVE MARY NELSON, SPONSOR, related that the bill
was an idea brought forth by the Alaska Energy Authority
(AEA). She reported that old statutes needed updating. The
primary idea in the bill is in Section 2, which authorizes
AEA to make loans from the Power Project Fund (PPF) to the
Bulk Fuel Revolving Loan Fund (BFRLF). Presently, there is
a lot of pressure on AEA due to the high price of fuel to
provide more loans from BFRLF. The bill would limit the
amount AEA could borrow from PPF to the BFRLF to the lesser
of $2 million, or 10 percent of the PPF cash balance on June
30 of the preceding fiscal year. It provides that AEA can
not borrow from PPF if the cash balance of PPF is less than
5 million.
Representative Nelson reported that the bill also deleted
references to nonprofit marketing cooperatives as potential
borrowers and deletes PPF loan provisions for potable water
supply projects.
Representative Nelson related that Section 3 provides that
power projects are subject to the same limitations on
interest and other restrictions as are loans for power
projects. Section 1 establishes the BFRLF as statutorily
able to make loans to communities. It is a separate loan
program established in 2004 by the Denali Commission,
especially for communities that are struggling
administratively. She explained the problems surrounding
statutory authority and third party contract relationships.
Representative Nelson reported on the successes of the
BFRLF.
12:14:21 PM
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT testified via teleconference that HB
338 authorizes AEA to make loans from PPF to BFRLF. She
related that the BFRLF provides communities of 2,000 or less
a financing source to purchase an annual supply of fuel.
AEA currently only commits to loans based on the cash
available and does not consider loans receivable prior to
committing a loan. HB 338 would provide a backstop source
of funds to allow AEA to better meet the needs of the
borrowers.
Ms. Fisher-Goad reported that two years ago there was a
delay in committing funds until loan repayments - the actual
cash - was received by AEA. This made it difficult to be
able to provide the commitments for borrowers to plan for
fuel delivery. HB 338 does limit the lending ability by
restricting the amount based upon the June 30 cash balance
of PPF and is limited by the lesser of $2 million or 10
percent. On 2/29 the cash balance in the PPF was $10.8
million. If the bill were in effect today there would be a
little over $1 million as a backstop funding source. If PPF
falls below $5 million, AEA would suspend the borrowing
capability.
Ms. Fisher-Goad reported on housekeeping measures in the
bill.
12:16:36 PM
Senator Huggins asked if the bill increases risk to AEA.
Ms. Fisher-Goad said she believed it was risk neutral. The
loans are short term and the delinquency rate is very low.
12:17:24 PM
DEL CONRAD, CEO, RURAL ALASKA FUEL SERVICES (RAFS), said
that since the inception of the BFRLF in 2004, about 12
communities were unable to fund their fuel purchases due to
an increase in fuel costs. The Department of Commerce,
Community and Economic Development contracted out to manage
the loans and work with the communities. The Rural Alaska
Fuel Services purchases fuel on behalf of the community. If
the loan is paid back on a timely basis, the money is loaned
for three years interest free. In addition, RAFS goes to
out to the communities to review the books, establish
pricing, and build budgets. He described how he sets up the
programs.
Mr. Conrad reported that RAFS has made loans to 26
communities throughout rural Alaska in the last four years
for a total of $6.5 million. He described the successes of
the program and the fund sources.
12:23:25 PM
Senator Olson MOVED to ADOPT Amendment 1:
Insert new Section 4 that amends AS 42.45.250(e)(1) to
read:
"(1) may not exceed $500,000 [$400,000], or, if the
borrower is a cooperative corporation organized under
AS 10.15 or an electric cooperative organized under AS
10.25 and uses the loan to purchase bulk fuel on behalf
of more than one community, may not exceed the lesser
of $500,000 [$400,000] multiplied by the number of
communities on whose behalf the bulk fuel is to be
purchased, $1,800,000 [$1,500,000].
Senator Olson explained that the amendment would increase
the loan limits for the Bulk Fuel Revolving Loan Fund to
better match the increased cost of fuel.
Co-Chair Stedman OBJECTED.
Senator Olson noted the current loan has been inadequate in
some communities. He spoke of high transportation costs.
He added that the Department is in support of the amendment.
12:25:31 PM
Ms. Fisher-Goad confirmed that the Department is in support
of the amendment. It aligns the long-existing BFRLF with
the proposed limit for the Bridge Loan program. She
addressed the increased demand for loans.
Co-Chair Stedman WITHDREW his OBJECTION.
There being NO OBJECTION, Amendment 1 was adopted.
Representative Nelson worried about communities that would
need more monetary support.
12:27:07 PM
Mr. Conrad noted requests for three loans for $500,000
through the Bridge Loan program. He voiced concern that if
communities are short funded, then it will create a case of
flying in fuel in February with a significant increase in
cost. He predicted that it is unlikely that there will be
requests for loans in the $750,000 range in the next year,
but for the communities in that situation, there is
significant cost if fuel needs to be flown in.
Representative Nelson said the cost gets passed on to the
consumer at $11 or $12 per gallon when fuel is flown in.
12:29:12 PM
Co-Chair Hoffman MOVED to REPORT CSHB 338 (FIN), as amended,
from Committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
CSHB 338 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with zero fiscal note #1 by the
Department of Commerce, Community and Economic Development,
and with fiscal note #2 by the Department of Commerce,
Community and Economic Development.
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