Legislature(2017 - 2018)CAPITOL 17
03/01/2018 10:15 AM House ENERGY
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| Audio | Topic |
|---|---|
| Start | |
| HB374 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 374 | TELECONFERENCED | |
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 |