Legislature(2007 - 2008)SENATE FINANCE 532
07/31/2008 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB4002 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| = | SB4002 | ||
SENATE BILL NO. 4002
"An Act establishing the Alaska resource rebate program
and relating to the program; and providing for an
effective date."
Co-Chair Stedman announced that the bill before the
committee was CSSB 4002, version M. He provided some
history as to the reasoning behind the need for a bill to
address expensive energy costs. Version M of the bill
addresses resource rebate payments to offset the high cost
of heating oil. The program would last for two years
instead of one. The goal is to solve the challenges of the
bill.
9:18:11 AM
Co-Chair Hoffman MOVED to ADOPT CSSB 4002, labeled 25-
GS4057\M, Cook, 7/30/08, as the working document. There
being NO OBJECTION, it was so ordered.
Co-Chair Stedman commented that there is a component in the
bill dealing with natural gas that needs to be reworked.
Senator Dyson concurred with Co-Chair Stedman's comments.
He suggested including propane in the bill, also.
Co-Chair Stedman hoped all staff would be engaged in the
discussion.
9:19:42 AM
MILES BAKER, STAFF, CO-CHAIR STEDMAN, explained that the CS
provides for a resource rebate program and targets actual
energy needs. The program is a rebate program to help
offset high heating oil costs. It is a temporary two-year
program targeting winter costs. Residents will be able to
apply for the rebate of the cost of fuel above $3 per
gallon, up to a maximum of 600 gallons, for two 6-month
periods.
Mr. Baker explained how the applications would work. One
individual would be limited to 600 gallons per winter.
Co-Chair Stedman questioned the length of the program. Mr.
Baker corrected that it was for seven months during the
winter. He pointed out that commercial and governmental
facilities are not eligible, only residential homes,
including multi-unit residential dwellings.
9:24:35 AM
Mr. Baker related that qualified dealers would have to apply
under Alaska Energy Authority regulations. There are about
180 dealers around the state. They would complete a
registration process to certify that they could deliver the
fuel. A form would certify that the fuel was delivered and
the state would provide a rebate.
9:27:27 AM
Mr. Baker referred to page 2, subsection (e), for the
description of how dealers would register. Page 3,
subsection (f), has a provision that allows aggrieved
parties to request an administrative hearing. Subsection
(g) deals with the state's ability to recover rebates paid
to an individual based on false pretenses. Subsection (h)
contains hold harmless provisions. Subsection (m) exempts
fuel payments from levy or garnishment, similar to the
Governor's rebate program. Subsection (n) deals with the
warning if the submission is incomplete or inaccurate.
Subsection (o) sets up a class A misdemeanor if the
individual commits fraud. Page 5 verifies that "authority"
means the Alaska Energy Authority. The bill is uncodified
law and would be repealed in 2010.
9:29:41 AM
Mr. Baker referred to the new fiscal note for $172,889,000.
He pointed out that on page 2 a correction is needed to say
seven months instead of six months. He said that it is a
new program and it is unknown how many will apply. He
discussed the assumptions section of the fiscal note: the
average heating oil consumption, the average price per
gallon of heating oil, and the total number of households.
He detailed program cost projections.
9:32:29 AM
Mr. Baker pointed out that potential costs for the offsets
for the hold harmless provision and AEA administrative costs
are not included in the fiscal note.
Senator Elton asked how the program would deal with sales
tax. He gave an example of a tax on fuel at $5.00. He
wondered if the rebate program would apply to the tax as
well. Mr. Baker replied that as the bill is currently
written, the sales tax would be taken off before the rebate.
Each municipality has a different tax structure.
Senator Elton suggested including a provision about the
sales tax.
Co-Chair Stedman said those details could be worked out.
9:35:34 AM
Senator Dyson suggested that the paperwork be handled
through the distributor, not the homeowner. Mr. Baker
replied that he looked at that approach, which he thought
had pros and cons. Under the distributor model any fuel the
distributor sells would qualify for the rebate. It would
require billing the state for every delivery. The program
in the bill is optional. If it is required of the
distributor, many more billings would be filed. Mr. Baker
pointed out another advantage of the bill's version of
paying the rebate, a cash management incentive. Another
advantage would have been to fix the amount given to
distributors, thus causing competition. That program was
not included.
9:41:16 AM
Mr. Baker thought the bill's version of the program would be
more acceptable.
Senator Dyson suggested giving a premium to the dealer for
all of the paperwork involved. He voiced concern about non-
profits with residential programs. He wished not to exclude
those programs.
9:43:21 AM
Co-Chair Hoffman observed that the thrust of the program was
to give energy relief to Alaskans for two years. He
recalled the history of working on the issue. One problem
was identifying the various types of fuel consumers. He
described the process of coming up with a simple program.
He pointed out that the paperwork has to be done anyway
under LIHEAP. He mentioned the Chevez program in Venezuela.
He thought that the program in the bill was workable. He
emphasized the need for relief for Alaskans.
9:46:51 AM
Senator Thomas thought the bill had come a long way in
addressing the need for energy relief. He mentioned one
method of dealing with refiners. The bill recognizes the
problem and targets as many residents as possible in Alaska.
He noted the broad concerns considered when designing the
bill.
Co-Chair Stedman noted the collaboration on the bill.
Senator Elton voiced appreciation for the work. He turned
to page 1, line 9, to question if heating oil needed to run
a hot water heater was prohibited. He suggested to "offset
the cost of oil used for residences".
9:50:51 AM
Mr. Baker agreed. He also observed that "60 percent" could
be changed to compensate for non-heating uses of the oil.
Senator Elton thought there could be a better way to word
that section.
Senator Huggins asked if senior housing fell under this
umbrella. Mr. Baker said he would find out.
9:52:45 AM
RANDALL RUARO, SPECIAL ASSISTANT, OFFICE OF THE GOVERNOR,
brought up technical issues related to the bill. The title
"resource rebate" no longer seems appropriate. He suggested
that perhaps, "needs based assistance" would work better.
9:55:05 AM
Co-Chair Stedman pointed out that the plan was to combine
several of the energy bills without causing a taxable event.
Mr. Ruaro pointed out that the scope of eligibility has been
narrowed, which is an issue. The scope has also been
broadened in that residency requirements are reduced. He
thought the application process might be a timing issue.
The fiscal impact was reduced compared to the original
version of the bill.
9:57:17 AM
Co-Chair Hoffman asked for suggestions for improvement to
version M.
Co-Chair Stedman recognized that the fiscal note is now less
than the original one.
9:59:15 AM
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AND ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, addressed several issues regarding the
new CS to SB 4002. The previous version of the bill
provided for a rebate to all Alaskans, whereas the new
version limits aid to only half of that number. She
mentioned problems with AEA administering the bill. She
thought a contractual method might be used to implement the
program.
10:01:36 AM
Ms. Fisher-Goad observed that there may be issues with the
distributor.
Co-Chair Stedman requested assistance in addressing natural
gas and propane aid for the other half of state residents.
Co-Chair Hoffman noted that the concept of abuse by
suppliers is a possibility. He gave an example of an
individual eligible for 100 gallons of oil each month. The
supplier would be watching the price and would be unlikely
to raise rates due to this program because they are also
concerned about high energy costs. He suggested that there
may be other AEA programs that should be contracted out, as
well.
10:04:55 AM
Senator Olson referred to the fiscal note. He suggested
that the main emphasis is relief to residents. He wondered
how the fiscal note would include AEA's administrative
costs.
Ms. Fisher-Goad replied that she has not has a chance to
fully consider the fiscal note changes to include such
things as administrative costs. She pointed out a potential
area of fraud which would require implementation costs. She
offered to provide those answers.
10:07:40 AM
Co-Chair Hoffman said that one of his constituents suggested
helping out those who use generators for heating.
Senator Olson pointed out an issue on the North Slope where
communities are currently subsidized. He wondered if some
relief could be found for those communities.
AT-EASE: 10:10:48 AM
RECONVENE: 5:31:59 PM
Co-Chair Stedman noted that there was a new version of SB
4002 before the Committee.
5:32:45 PM
Co-Chair Hoffman MOVED to ADOPT a new CS to SB 4002, version
L. There being NO OBJECTION, it was so ordered.
DARWIN PETERSON, STAFF, CO-CHAIR STEDMAN, explained that the
new CS has three components. Sections 1-5 deal with power
cost equalization (PCE), Section 6 creates the Alaska
resource rebate program, which is an umbrella program for
Sections 7 and 8. Section 7 is the resource rebate, a
payment of $250 for each Alaskan resident which will be
attached to the Permanent Fund Dividend (PFD). Section 8 is
the home heating fuel portion of the bill, which was amended
based on the Committee's suggestions for improvement.
Mr. Peterson explained that the program is now called the
Emergency Energy Relief Program and the Alaska Energy
Authority (AEA) will continue to administer it. He said,
"They shall provide persons with energy relief payments to
offset the cost of fuel used for residences." He
highlighted a change from "individuals" to "persons" in
order to satisfy concerns by non-profit organizations.
Mr. Peterson related that another change was from "home
heating oil" to "fuel", with the definition of fuel being on
page 7, line 29, which now includes propane. The change
addresses Senator Dyson's concern. A change on page 4, line
21, says "fuel used for residences" rather than "fuel to
heat residences". This addresses Senator Elton's concern.
5:36:15 PM
Mr. Peterson highlighted page 5, lines 7 and 8, which gives
AEA permission to contract administrative duties to a
private firm. On page 7, lines 24 and 25, language was
deleted for conforming purposes.
Co-Chair Stedman asked for an explanation about the PCE
components.
JAY LIVEY, STAFF, SENATOR HOFFMAN, explained the changes to
the PCE part of the bill, which is now Section 1. In the
previous version of the bill, the amount of money paid to
public facilities was based on population. That has been
changed to consider the amount of power produced by the
utility.
Co-Chair Stedman requested definitions.
Mr. Livey related that the PCE program is for eligible
electric utilities and is based on not more than 70 kilowatt
hours a month for each resident of the community. That has
been amended so that large communities no longer qualify
based on a residential consumption level of more than 25,000
megawatt-hours during the previous calendar year.
5:40:03 PM
Co-Chair Stedman defined PCE as Power Cost Equalization.
Senator Olson asked what affect this version of the bill
would have on smaller communities. Mr. Livey said there
would be no affect; the new version of the bill mainly
excludes Fairbanks. Senator Olson asked if villages on the
North Slope would be affected. Mr. Livey said they were not
eligible for PCE and would not be affected by these changes.
He thought they would be eligible for some power cost
reduction.
5:41:31 PM
Senator Dyson asked what the lower limit has been for a
community to qualify for PCE. Mr. Livey reported that the
lower limit was 12.8 cents per kilowatt, and the upper limit
was 52.5 cents per kilowatt. Senator Dyson asked how small
a community could be in order to qualify under existing law.
Mr. Livey explained that current law states that to qualify
for PCE a community must be rural, have a certain amount of
kilowatt usage, and use oil for the production of
electricity. He shared the history of PCE since 1984.
Senator Dyson asked if a community has to have a public
utility. Mr. Livey said he thought it had to have a utility
registered through the Regulatory Commission of Alaska.
Senator Dyson asked how small a 10 megawatt community might
be. Mr. Livey said he would have to check on that.
Co-Chair Stedman said that legislative finance would help
explain the financial analysis at a later date.
5:45:51 PM
Mr. Livey turned to Section 2 of the bill to explain the PCE
floor and ceiling. Subsection (c)(2)(A) defines a new upper
limit of $1.15, which used to be $2.00.
Mr. Livey referred to subsection (c)(1), which calculates a
new lower limit at 95 percent of the difference between a
minimum power cost calculated as five cents less that the
weighted average retail residential power rate in Anchorage,
Fairbanks, and Juneau. It sets a lower limit than PCE
previously had.
5:48:00 PM
Mr. Livey referred to Section 4, subsection (k) to explain
that no utility would have less than five cents a kilowatt-
hour reduction in PCE. All utilities will receive some
electrical relief.
Senator Huggins requested more information about which
communities fall into the various categories. Co-Chair
Stedman said that legislative finance would provide that
information.
5:49:39 PM
Senator Dyson referred to page 3, line 9, which defines an
eligible electrical utility. He pointed out that it does
not say it falls under the Regulatory Commission and it does
include an individual. Co-Chair Stedman offered to find out
more about the eligible electric utility.
Mr. Livey said the eligible electrical utility describes
which utilities can be eligible for PCE, and the amount of
PCE will be based on the utility's costs as determined by
RCA.
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY AND ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, explained Section 5 on page 3. She
defined "public" as ten or more people. She requested that
RCA clarify that.
5:52:34 PM
Mr. Livey reported that the final change was that 500
kilowatt-hours per month is the amount used for eligibility
in the current bill.
Co-Chair Hoffman thought the bill was a comprehensive relief
package for Alaskans.
5:54:27 PM
Senator Dyson encouraged the Committee to think about the
wisdom of grouping all components together in one bill.
Senator Huggins thought that some sacrifice would be needed
in order to meet energy needs. He approved of the package
concept and the short term limit, as well as the expectation
that programs will be forthcoming to meet energy costs.
5:56:18 PM
Co-Chair Stedman turned to page 4, line 11, and stressed
that the rebate has not been entirely removed. Each
component of the energy package is an attempt to help the
citizens across the state with energy relief, which would be
a two-year program, except for the $250 rebate.
5:58:18 PM
Co-Chair Hoffman observed two other areas that would be
served by an appropriation bill. One is an alternative
energy program with an additional $40 million added.
Another is the energy rebate program with an additional
appropriation of $30 million. They do not appear in this
bill; however, the Senate plans to address alternative
energy programs, and a general appropriation of a $250
rebate added to the permanent fund. The result will be a
broad spectrum of relief that Alaskans are expecting.
SB 4002 was heard and HELD in Committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|