Legislature(2017 - 2018)CAPITOL 17

03/01/2018 10:15 AM ENERGY

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Audio Topic
10:17:49 AM Start
10:18:08 AM HB374
10:55:50 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 374 ON-BILL FINANCING OF ENERGY IMPROVEMENTS TELECONFERENCED
Heard & Held
-- Public Testimony --
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE SPECIAL COMMITTEE ON ENERGY                                                                              
                         March 1, 2018                                                                                          
                           10:17 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Adam Wool, Chair                                                                                                 
Representative Matt Claman                                                                                                      
Representative John Lincoln                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Jennifer Johnston                                                                                                
Representative George Rauscher                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Ivy Spohnholz, Vice Chair                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 374                                                                                                              
"An Act relating to on-bill financing by an electric or gas                                                                     
distribution utility for certain energy efficiency and                                                                          
conservation improvements."                                                                                                     
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 374                                                                                                                  
SHORT TITLE: ON-BILL FINANCING OF ENERGY IMPROVEMENTS                                                                           
SPONSOR(s): REPRESENTATIVE(s) WOOL                                                                                              
                                                                                                                                
02/21/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/21/18       (H)       ENE, L&C                                                                                               
03/01/18       (H)       ENE AT 10:15 AM CAPITOL 17                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ROB EARL, Staff                                                                                                                 
Representative Adam Wool                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 374 on behalf of the bill                                                                   
sponsor, Representative Wool.                                                                                                   
                                                                                                                                
JOMO STEWART, General Manager                                                                                                   
Interior Gas Utility                                                                                                            
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified during discussion of HB 374.                                                                   
                                                                                                                                
CORY BORGESON, President & CEO                                                                                                  
Golden Valley Electric Association                                                                                              
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified during discussion of HB 374.                                                                   
                                                                                                                                
LOUIE FLORA, Government Affairs Director                                                                                        
The Alaska Center                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 374.                                                                          
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
10:17:49 AM                                                                                                                   
                                                                                                                                
CHAIR  ADAM WOOL  called the  House Special  Committee on  Energy                                                             
meeting to  order at 10:17  a.m. Representatives  Wool, Rauscher,                                                               
Lincoln,  and  Johnson  were  present   at  the  call  to  order.                                                               
Representatives Johnston  and Claman  arrived as the  meeting was                                                               
in progress.                                                                                                                    
                                                                                                                                
        HB 374-ON-BILL FINANCING OF ENERGY IMPROVEMENTS                                                                     
                                                                                                                                
10:18:08 AM                                                                                                                   
                                                                                                                                
CHAIR WOOL  announced that  the only order  of business  would be                                                               
HOUSE BILL NO.  374, "An Act relating to on-bill  financing by an                                                               
electric  or   gas  distribution   utility  for   certain  energy                                                               
efficiency and conservation improvements."                                                                                      
                                                                                                                                
10:18:27 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  RAUSCHER moved  to adopt  the proposed  committee                                                               
substitute  (CS)   for  HB  374,  labeled   30-LS1333\U,  Laffen,                                                               
2/28/18, as the working draft.   There being no objection, it was                                                               
so ordered.                                                                                                                     
                                                                                                                                
10:18:56 AM                                                                                                                   
                                                                                                                                
ROB  EARL,   Staff,  Representative   Adam  Wool,   Alaska  State                                                               
Legislature, paraphrased from the  Sponsor Statement [Included in                                                               
members' packets], which read:                                                                                                  
                                                                                                                                
     HB 374 would  allow a utility to  voluntarily create an                                                                    
     on-bill financing or on-bill  repayment program to help                                                                    
     customers   finance    energy   improvements.       The                                                                    
     improvement  must utilize  renewable energy  or include                                                                    
     switching to a more efficient  device or fuel that does                                                                    
     not   increase   greenhouse   gas  emissions.      This                                                                    
     legislation   will  be   particularly  useful   as  the                                                                    
     Interior Energy  Project expands its reach  and a large                                                                    
     number of  Fairbanks residents  choose to  convert from                                                                    
     oil to natural gas to heat their homes.                                                                                    
                                                                                                                                
     The   on-bill  financing   program  allows   a  utility                                                                    
     customer to borrow money for  an energy improvement and                                                                    
     then repay it through  a "meter conservation charge" on                                                                    
     their utility  bill.  A  customer's utility  bill, even                                                                    
     with   the   meter   conservation  charge,   is   often                                                                    
     immediately lower  due to savings  in energy  costs due                                                                    
     to increased efficiency.                                                                                                   
                                                                                                                                
     Examples  of  energy  improvements that  would  qualify                                                                    
     under HB 374 include:   adding solar panels to a house;                                                                    
     converting  to  a  cleaner   burning  wood  stove;  and                                                                    
     converting  a   boiler  or  furnace  to   natural  gas.                                                                    
     Weatherization  projects such  as upgrading  windows or                                                                    
     insulation would not qualify under this legislation.                                                                       
                                                                                                                                
     HB 374  allows for utilities  to create either  an "on-                                                                    
     bill  financing"  or  an "on-bill  repayment"  program.                                                                    
     Under the former type of  program, the utility provides                                                                    
     the capital for the loan  to the customer and under the                                                                    
     latter  a  third   party  financial  institution  would                                                                    
     provide the capital.                                                                                                       
                                                                                                                                
     A  utility may  recoup  all of  their costs  associated                                                                    
     with the program  through a line item on the  bill of a                                                                    
     customer who has elected to  utilize the program for an                                                                    
     energy improvement.   The  balance of  the costs  on an                                                                    
     on-bill  financing agreement  may be  recovered by  the                                                                    
     utility when a property is sold.                                                                                           
                                                                                                                                
     HB  374 provides  an optional  tool  for utilities  and                                                                    
     their customers  to lower energy costs  and improve air                                                                    
     quality in Alaska.                                                                                                         
                                                                                                                                
REPRESENTATIVE JOHNSON asked about the default on a loan.                                                                       
                                                                                                                                
CHAIR WOOL  offered his belief that,  if the house was  sold, the                                                               
new buyer would  have to pay the remaining loan,  although he was                                                               
not clear about the default of a loan.                                                                                          
                                                                                                                                
REPRESENTATIVE  RAUSCHER  asked what  form  or  notice should  be                                                               
given to consumers, such as  the financing truth and lending full                                                               
disclosure.                                                                                                                     
                                                                                                                                
MR. EARL explained  that the utility would have  to submit notice                                                               
before the meter  charge was included and when it  was taken off.                                                               
The intent  was to  make it  transparent that  there was  a meter                                                               
conservation  charge on  the house.    He added  that a  landlord                                                               
would have  to notify a tenant,  or the tenant could  deduct that                                                               
charge from  their rent  for up  to half the  term of  the rental                                                               
agreement.                                                                                                                      
                                                                                                                                
MR.  EARL, in  response to  Representative Rauscher,  stated that                                                               
the tenant, the utility, and the  landlord had to all agree prior                                                               
to  entering   into  an  agreement,   in  order  to   maintain  a                                                               
transparency.   He  reported  that the  tenant  would usually  be                                                               
paying the  conservation charge unless a  different agreement was                                                               
made.                                                                                                                           
                                                                                                                                
10:25:38 AM                                                                                                                   
                                                                                                                                
JOMO STEWART, General Manager, Interior  Gas Utility, shared some                                                               
background on  the project.   He said that  during the run  up in                                                               
oil prices,  the majority of  communities which  relied primarily                                                               
or  solely  on  oil  suffered devastating  cost  increases.    He                                                               
estimated that this was pulling  $400-600 million annually out of                                                               
the Fairbanks  economy.   He explained that,  as the  economy was                                                               
based  on   the  private   interaction  between   commercial  and                                                               
residential,  this  diminished  the  ability of  many  people  to                                                               
finance  the conversion  over to  another fuel  source.   He said                                                               
that, although  the gas  utility had the  funding to  install the                                                               
major infrastructure to  increase the availability of  gas in the                                                               
community, the cost  of conversion was "an  outstanding item that                                                               
needed to  be addressed, how are  people going to pay  to convert                                                               
their homes ... over to use of  natural gas."  He stated that, as                                                               
there  was recognition  that the  utility would  not self-finance                                                               
assistance with  conversions, this  option for  on-bill repayment                                                               
was  offered  to residents  as  an  incentive.   He  noted  that,                                                               
however, "the  law in the State  of Alaska was silent  on on-bill                                                               
financing and on-bill  repayment."  So, it was  recommended to be                                                               
best for  the utilities that  the law positively permit,  and set                                                               
guidelines for, on-bill financing and on-bill repayment.                                                                        
                                                                                                                                
CHAIR WOOL  asked if the  concept of  on-bill financing was  in a                                                               
recent questionnaire  or was it  simply a question for  people to                                                               
pay their own money for conversion from oil to gas.                                                                             
                                                                                                                                
MR. STEWART  offered his belief that,  as most of that  focus had                                                               
been  for self-financing,  much of  the discussion  had been  for                                                               
cash  assistance  to a  conversion  for  more efficient,  cleaner                                                               
solid fuel devices.                                                                                                             
                                                                                                                                
REPRESENTATIVE  JOHNSTON asked  how this  would interact  with HB                                                               
80.                                                                                                                             
                                                                                                                                
CHAIR WOOL explained  that HB 80 was the  PACE (Property Assessed                                                               
Clean Energy)  bill for commercial  properties and did  not apply                                                               
to individually owned  properties.  He added that  it stayed with                                                               
the building and  a new owner would then take  possession of that                                                               
loan.   He pointed out that  the proposed bill was  primarily for                                                               
residential properties, was facilitated  through the utility, and                                                               
not the municipality  as was HB 80, and would  be cashed out upon                                                               
sale of the property.                                                                                                           
                                                                                                                                
MR.  STEWART opined  that  the two  bills  would complement  each                                                               
other.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  RAUSCHER asked  if this  would  be a  first or  a                                                               
second loan  when applying to  refinance.   He asked if  this had                                                               
been vetted through the financiers.                                                                                             
                                                                                                                                
CHAIR WOOL offered his belief that the bank would be paid first.                                                                
                                                                                                                                
REPRESENTATIVE RAUSCHER asked if the utility was paid first.                                                                    
                                                                                                                                
CHAIR WOOL said that the house loan would be paid first.                                                                        
                                                                                                                                
10:35:20 AM                                                                                                                   
                                                                                                                                
CORY   BORGESON,  President   &  CEO,   Golden  Valley   Electric                                                               
Association, reported  that Golden  Valley served power  to about                                                               
44,000 meters.   He  expressed appreciation  and support  for the                                                               
proposed   bill,  pointing   out  that   this  was   a  voluntary                                                               
opportunity for  each utility.  He  reported that this was  for a                                                               
fixed interest, as the financing should  not be for too long.  He                                                               
declared  that  it  was  important to  recognize  that  the  bill                                                               
allowed for shutting  off power for the non-payment  of the loan.                                                               
He  pointed  out that,  otherwise,  this  would have  required  a                                                               
decision by  the Regulatory  Commission of  Alaska (RCA),  and it                                                               
would  have  caused  the  utilities  to  think  twice  about  the                                                               
proposed bill  for on-line financing.   He noted that,  as Golden                                                               
Valley was economically regulated by  the RCA, the proposal would                                                               
be  subject  to  approval  for  being  fiscally  responsible  and                                                               
viable.  He mused that there  was a broad definition for eligible                                                               
equipment, noting that  the idea was to finance  solar panels and                                                               
other renewable  energy equipment.   He opined that  many members                                                               
had energy inefficient equipment, which  lead to higher bills and                                                               
more difficulty with  payment.  He stated that, if  it was at all                                                               
possible  to lower  their  bills and  meet  the obligations,  the                                                               
utility welcomed this opportunity for  a broad spectrum of energy                                                               
efficiency.    He  offered  his belief  that  any  utility  would                                                               
recognize  that  there was  a  certain  element  of risk  in  any                                                               
similar program,  which would be  factored.  He pointed  out that                                                               
the  cap on  the  interest  rate, 2  percent  above prime,  might                                                               
inhibit  this  program  as  it  would have  to  meet  the  credit                                                               
worthiness of the applicant.  He  opined that it should all work,                                                               
and  he  welcomed the  opportunity  for  cleaner, more  efficient                                                               
power in Fairbanks.                                                                                                             
                                                                                                                                
CHAIR WOOL pointed out that  the committee substitute, Version U,                                                               
removed that 2 percent cap.                                                                                                     
                                                                                                                                
REPRESENTATIVE JOHNSTON expressed her  concern for a system which                                                               
was  installed,  and  then,  if  the owner  could  not  make  the                                                               
payments, the  utility would  be cut  off.   She mused  that this                                                               
could be "hard to get back out from under."                                                                                     
                                                                                                                                
MR.  BORGESON  acknowledged the  concern,  and  he reported  that                                                               
Golden Valley had  procedures in place for  individuals who could                                                               
not pay their bills.  He  expressed agreement that an unpaid bill                                                               
would place  a bigger  burden on  the customer.   He  pointed out                                                               
that, as  Golden Valley was  also at  risk, this would  require a                                                               
credit evaluation.                                                                                                              
                                                                                                                                
REPRESENTATIVE JOHNSON  asked if the  RCA would have  any problem                                                               
with this program.                                                                                                              
                                                                                                                                
MR. BORGESON explained that Golden  Valley was very interested in                                                               
the reduction of  demand side management in an  attempt to reduce                                                               
the peaks.  He noted that  they reviewed the three peaks each day                                                               
to assign  the costs,  and, as  Golden Valley  wanted to  see the                                                               
residential cost  reduced, more  efficient equipment  would help.                                                               
He stated  that the  RCA would review  the on-bill  financing for                                                               
reduction of the  consumer peak loads, especially  in the morning                                                               
and at night.  If that load  could be levelled out, then the cost                                                               
would go down.   He opined that the RCA  would recognize this, as                                                               
it all fit together.                                                                                                            
                                                                                                                                
REPRESENTATIVE  JOHNSON  recollected  the incentives  offered  by                                                               
Golden Valley for  electrical appliances.  She asked  if this was                                                               
a marketing opportunity for more energy efficiency.                                                                             
                                                                                                                                
MR. BORGESON replied  that Golden Valley, since  the early 1990s,                                                               
had  been  heavily  committed   to  energy  efficiency  programs,                                                               
including educational  and energy  audits.   He said  that Golden                                                               
Valley was  "always trying to  reduce the consumption so  that we                                                               
can build  less generation  and have  lower cost  for everybody."                                                               
He offered  his belief  that more efficiency  was always  a goal,                                                               
and  stated that  they  were not  trying  to increase  electrical                                                               
consumption.     They   wanted   prudent,   responsible  use   of                                                               
electricity.                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON asked if this included storage.                                                                          
                                                                                                                                
MR.  BORGESON  said  that  this   was  an  exciting  opportunity,                                                               
declaring  "cause that's  where the  future lies,  being able  to                                                               
take power when it's cheap and store it and use it later."                                                                      
                                                                                                                                
CHAIR WOOL  said that this  would also enter into  the discussion                                                               
for peak use, as someone could use stored energy.                                                                               
                                                                                                                                
10:46:44 AM                                                                                                                   
                                                                                                                                
LOUIE  FLORA, Government  Affairs  Director,  The Alaska  Center,                                                               
explained  that  the Alaska  Center  was  a statewide  non-profit                                                               
organization based in Anchorage,  which promoted clean energy and                                                               
civic engagement  policies and projects  in Alaska.   He declared                                                               
support for  the Committee  Substitute for HB  374.   He reported                                                               
that the Alaska  Center was supportive of on-bill  financing as a                                                               
policy tool to  help Alaska reach its  aspirational energy policy                                                               
goals, which had  been established in 2010 under  House Bill 306,                                                               
and  called for  the  state  to achieve  a  50 percent  renewable                                                               
energy  use by  2025  and a  15 percent  increase  per capita  in                                                               
energy efficiency  between 2010  and 2020.   He pointed  out that                                                               
these  were  still  aspirational goals  for  mandatory  statewide                                                               
energy efficiency and the renewable  energy target.  He said that                                                               
roof top  solar and thermal  heat pumps were two  technologies of                                                               
particular  promise  that could  be  moved  forward with  on-bill                                                               
financing.  In  Juneau, there had been about 200  air source heat                                                               
pumps  installed in  residences  and businesses  during the  past                                                               
three  years and  on-bill financing  could  allow for  more.   He                                                               
reported that  more than 20,000  thermal pumps had  been deployed                                                               
in  Maine.   In  Anchorage,  the  Alaska  Center was  working  in                                                               
partnership  with Launch  Alaska,  Alaska Center  for Energy  and                                                               
Power,  and  the  National Association  for  the  Advancement  of                                                               
Colored People  to facilitate the bulk  purchase and installation                                                               
of  residential roof  top solar  panels,  the Solarize  Anchorage                                                               
campaign.   He declared that on-bill  financing, specifically for                                                               
roof  top solar,  could  help homeowners  not  able to  otherwise                                                               
afford it.   He acknowledged  that the effectiveness of  this on-                                                               
bill  financing  mechanism  relied  on  the  willingness  of  the                                                               
utilities to adopt the program on  behalf of the rate payers, and                                                               
that the voluntary nature of  the proposed legislation would help                                                               
the utilities  and the rate payers.   He reported that  more than                                                               
100  cooperatives  in 26  states  offered  some form  of  on-bill                                                               
financing.    He referenced  an  analysis  of common  themes  for                                                               
success  for on-bill  financing  programs  throughout the  United                                                               
States, which  included:   member friendly  application processes                                                               
should not  be any more  complicated or lengthy than  other types                                                               
of consumer loans;   program should allow  for on-line processing                                                               
of  applications, audit  bids,  and  program tracking;  efficient                                                               
administration  of   the  on-bill   financing  program   must  be                                                               
streamlined  and  cost  effective;   attractive  terms  with  low                                                               
interest rates  and long repayment  terms, in the range  of 10-15                                                               
years;  quality products  and contractors,  with high  standards;                                                               
flexibility to  match the  unique needs  and capabilities  of the                                                               
cooperative  offering  the  program; programs  should  strive  to                                                               
accept applicants  with not good  credit history and have  a loan                                                               
loss reserve;  programs must  follow federal  and state  laws and                                                               
regulations  on consumer  lending; broad  coverage for  different                                                               
types  of  energy  efficiencies  and  renewable  energy  measures                                                               
should  be  eligible  for  participation  in  the  program;  and,                                                               
cooperative  staff time  should be  adjusted as  needed to  avoid                                                               
limiting participation in  a financing program.   He concluded by                                                               
stating that Version  U was a good starting  point for discussion                                                               
of on-bill  financing in Alaska  and they supported  this effort.                                                               
He suggested that  the committee consider a  better definition to                                                               
the term "administrative cost."                                                                                                 
                                                                                                                                
10:55:15 AM                                                                                                                   
                                                                                                                                
CHAIR WOOL said that the bill would be held over.                                                                               
                                                                                                                                
10:55:50 AM                                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special Committee on Energy meeting was adjourned at 10:55 a.m.                                                                 

Document Name Date/Time Subjects
HB 374 - Fiscal Note - DCCED - RCA - Zero.pdf HENE 3/1/2018 10:15:00 AM
HB 374
HB 374 - Committee Substitute - Version U 2.28.18.pdf HENE 3/1/2018 10:15:00 AM
HB 374
HB 374 - Sponsor Statement 2.28.18.pdf HENE 3/1/2018 10:15:00 AM
HB 374
HB 374 - Supporting Document - DOE Summary of On-Bill Financing 2.27.18.pdf HENE 3/1/2018 10:15:00 AM
HB 374
HB 374 - Sectional Analysis - Version U 2.28.18.pdf HENE 3/1/2018 10:15:00 AM
HB 374