Legislature(2007 - 2008)HOUSE FINANCE 519
07/31/2008 04:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB4001 | |
| HB4005 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB4001 | TELECONFERENCED | |
| += | HB4005 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
July 31, 2008
4:12 P.M.
CALL TO ORDER
Co-Chair Chenault called the House Finance Committee meeting
to order at 4:12:50 PM.
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
None
ALSO PRESENT
Representative Andrea Doll; Representative Sharon Cissna;
Representative Bryce Edgmon; Representative Kurt Olsen;
Senator Charlie Huggins; Karen Rehfeld, Director, Office of
Management and Budget; Pat Galvin, Commissioner, Department
of Revenue; Frank Richards, Deputy Commissioner of Highways
& Public Facilities, Department of Transportation and Public
Facilities; Suzanne Armstrong, Staff, Representative Kevin
Meyer; David Teal, Director, Legislative Finance Division;
Ron Kreher, Division of Public Assistance, Department of
Health and Social Services; Jerry Burnett, Director,
Division of Administrative Services, Department of Revenue;
Sarah Fisher-Goad, Deputy Director of Operations, Alaska
Energy Authority, Department of Commerce, Community and
Economic Development, Randall Randall Ruaro, Special
Assistant, Office of the Governor.
PRESENT VIA TELECONFERENCE
None
SUMMARY
HB 4001 An Act making supplemental appropriations, capital
appropriations, reappropriations, and other
appropriations; making appropriations to
capitalize a fund; and providing for an effective
date.
HB 4001 was HEARD and HELD in Committee for
further consideration.
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 and HELD in Committee for
further consideration.
HOUSE BILL NO. 4001
An Act making supplemental appropriations, capital
appropriations, reappropriations, and other
appropriations; making appropriations to capitalize a
fund; and providing for an effective date.
4:14:38 PM
KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
explained that HB4001 totals over $700 million and will
provide resources necessary for the Alaska Gas Inducement
Act (AGIA) license before the legislature. Included are
implementation costs, the reimbursement fund, job training
for Alaskans, instate gas use, and infrastructure for gas
pipeline construction. She relayed that the major component
of the bill was the $500 million request to capitalize the
AGIA reimbursement fund. The request was for reappropriation
of $300 million from the Alaska Housing Finance Corporation
(AHFC) plus $36 million of interest combined with $164
million of general funds, which would fully capitalize the
reimbursement fund at the $500 million.
Ms. Rehfeld added that another component of the bill
requests $15 million for gas pipeline implementation.
Components within that request include contractual expertise
that would be needed on an ongoing basis for the gas
pipeline implementation, and she stated that $42.7 million
was needed for workforce development through the Departments
of Labor, Education, and the University of Alaska. She
continued that there was approximately $130 million for the
Department of Transportation and Public Facilities (DOT/PF)
for infrastructure projects in the state and $25 million
proposed for the Alaska Natural Gas Development Authority
(ANGDA) instate gas use project.
4:17:20 PM
Ms. Rehfeld provided an analysis of section one which
includes appropriations for capital projects and grants from
the general fund or other funds as set out in section two or
this act by funding sources to the agencies named for the
purposes expressed. These appropriations are for the
Department of Education workforce scholarship program and
for recent high school or GED graduates preparing for
careers in AGIA related occupations. This would be operated
through the post secondary education commission. Also
included is an appropriation to the Department of Labor &
Workforce Development including $34.8 million dollars.
Components of this request include a pipeline administrator,
$26.5 million for a competitive grant program for a
technical training plan for the gas line, $2 million for a
pipeline training center, $1.5 million for the Alaska
vocational technical center in Seward, $2.5 million for GED
program and adult basic education, and a $750 thousand
request for skills upgrade and training, and a job awareness
program. $23.5 million for the Haines highway
reconstruction, realignment and Chilkat River bridge
replacement. $1 million would be for the University of
Alaska for equipment purchases. Finally, the reappropriation
request of the earnings within the AHFC where the $300
million has been residing, and a request of $164 million to
capitalize the AGIA reimbursement fund, complete section
one.
4:22:26 PM
Co-Chair Chenault asked if the $500 million for TransCanada
should be appropriated out of total general funds. Ms.
Rehfeld responded that the legislature could determine if
the funds from (AHFC) could be used. She claimed that it was
proposed because there had been discussion that the $300
million had been set aside for the purpose of creating a gas
pipeline. She stated that she was not opposed to a different
method of appropriation rather than taking the $300 million
from AHFC.
4:23:52 PM
Representative Gara requested more information on the
funding of $500 million dollars for AGIA and how the $300
million dollars got into the AHFC account. He asked if they
were dividend dollars. Ms. Rehfeld replied that the $300
million was appropriated to the AHFC account in FY 2006.
Representative Gara thought that the dividends should be
used for low income housing purposes unless the $300 million
were appropriated as savings. Co-Chair Chenault added that
the $300 million were appropriated to AHFC as a savings
account.
4:24:59 PM
Co-Chair Chenault clarified that the intent of the meeting
was to give an overview of the discussed components of the
projects. He stated that the bill will come back to
Committee for public testimony. Representative Gara wanted
the opportunity to ask questions of the department heads at
a future date.
4:26:23 PM
Representative Gara questioned the appropriation to (ANGDA)
for spur line permits. He understood that AGIA provides for
five points within the state. He expressed interest in the
spur line that provides instate gas rather than the
immediate spur line for the export of gas. He wanted to
know more about the spur line money.
4:27:31 PM
PAT GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, explained
that the spur line discussed in the ANGDA appropriation
would serve the Southcentral Anchorage area.
Representative Gara asked why the first permit being funded
was for the spur line. Commissioner Galvin recommended that
ANGDA discuss that. He discussed the need to bring gas into
populated parts of the state. The line would go through the
Fairbanks area and continue along the highway out of the
state. He noted the value of having a line connecting the
main line into the Anchorage area. The spur line would
connect Anchorage or the Cook Inlet to the rest of the
distribution system. As gas development takes place, supply
will dictate where the line runs. Ultimately, the gas
distribution system must connect Southcentral area to the
main line. He stated that ANGDA has identified the project
sequencing. The funding would put the state in a position
to take maximum advantage of the development of the
mainline.
4:30:30 PM
Representative Gara expressed concern about unnecessary
spending. He noted the other possibility of a bullet line
from the North Slope to Anchorage. Commissioner Galvin
responded that the need for the spur line exists regardless
of the options. The spur line is on the same route as the
bullet line. He stated that the work should be done now for
the ultimate connection of the line, and that each option
requires this particular segment.
4:33:01 PM
Representative Gara understood that a spur line from
Fairbanks to Anchorage was needed for either the spur or
bullet line. Commissioner Galvin acknowledged that the
affected segments are between Anchorage, Glennallen, Delta,
and Fairbanks.
Representative Gara did not want to spend money on a line
that would never be used. Commissioner Galvin clarified
that the state's interest has always been the Richardson
Highway route. He believed that it was in the state's best
interest to begin the work, so that the preliminary project
is finished when the discussed options become available.
Representative Gara felt it was premature to start spending
money on a line from Glennallen to Anchorage until the
decision was made. Commissioner Galvin emphasized getting
gas to Alaskans who don't currently have access.
4:35:27 PM
Co-Chair Chenault noted the projected total of $1.2 billion
dollars for repairs to gas pipeline associated roads. He
asked why the state of Alaska should use general funds to
pay for the road repairs, when the possibility exists that
they could be rolled into the tariff rates. Commissioner
Galvin stated that the Dalton Highway was an asset greater
than facilitating the construction of a gas line.
Development on the North Slope is intended for oil
exploration and an emerging gas exploration.
4:37:16 PM
Co-Chair Chenault asked if the state was not building a gas
line, highway work would be needed. He thought that the
expense should be tied into the tariffs of the pipeline
itself.
4:38:56 PM
Representative Thomas expressed concern about future capital
budgets. Ms. Rehfeld understood his concern. Representative
Thomas wanted his district to have local employment
opportunities in addition to those provided by the pipeline.
4:39:52 PM
Representative Crawford queried the prohibition of the use
of federal funds for regular road maintenance.
FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, stated that the challenge with the Federal
Highway Funds is the Federal Highway Trust Fund is facing a
significant reduction in the amount of revenue flowing into
it due to the high cost of gasoline and the resulting
reduced amount of miles driven. The fund is seeing fewer
increases and a reduction of federal funds is anticipated.
The challenge is taking the funds received and achieving the
projects currently in the Statewide Transportation
Improvement Program (STIP), with the mentioned budget
constraints. He explained that the goal of using general
fund dollars was to enable a reliever on the STIP in future
years, allowing STIP dollars to be spent on other priority
projects.
Representative Crawford questioned if the department's goal
was to lock the state in if the funds were not available
from the federal government. Mr. Richards provided an
example of three Dalton projects using federal dollars. The
constraints of the STIP dollars, has resulted in fewer
projects and have delayed some projects.
4:44:03 PM
Representative Crawford asked about the time frame for the
construction projects. Mr. Richards stated that the three
projects would be bid in the fall and begin in the summer of
2009, depending on the contractor's time frame. The emphasis
of other allocations is to start the design work for the
next construction season, creating the infrastructure and
minimizing competition from other projects.
Representative Crawford thought that the area needed a large
amount of maintenance each year because of the weather, the
trucks, and the use of the Dalton Highway. Mr. Richards
agreed; however foundation issues create a challenge. The
goal is to upgrade the embankment anywhere there is melting
permafrost, which will take a number of construction
seasons.
4:46:59 PM
Representative Kelly asked if federal dollars would be lost
if the project was initiated now. Mr. Richardson replied
that he did not know if federal money would be missed for
this road or if those federal dollars would instead be spent
on competing projects.
Representative Kelly reiterated the query regarding the use
of federal dollars. He pointed out that the state does not
know what the next authorization of the federal highway bill
will be, but possibly the majority of federal funds will go
to large communities for mass transit to reduce the amount
of green house gas emissions. He wondered if rural
population states would receive less money.
Mr. Richards stated that the federal program comes with
federal requirements of timelines and processes on a program
of this size. The use of the general fund could shave
millions of dollars off of the program and will maximize the
use of federal dollars providing the state with more
flexibility.
Representative Kelly understood that future appropriations
are difficult to determine. His interest was in the
prevention of forgoing any match. He claimed understanding
that the placement of the dollars will provide positive
benefits and net gains.
4:52:40 PM
Representative Gara noted that if the state spends money on
roads, it would free up $129 million for other STIP
projects. He did not know if the state could afford a
capital budget with this allocation of road money. He
proposed that the legislature move the projects up the
federal list in order to qualify for the federal funding and
queried the timeline of that scenario. Mr. Richards
explained that the department has a STIP application process
that is scored. He stated that "the STIP gets played and
becomes a political hot potato." The proposed highways are
part of a national highway system. The amount currently
received is about $75 million per year. Any of the other
projects would be postponed. The amount of money is limited,
yet the need is large.
Representative Gara asked when the roads would be
constructed if federal money was used. Mr. Richards
referenced the PowerPoint presentation showing the
individual projects. Several projects programmed have not
made it onto the STIP because it is a three year planning
document. He offered to provide information as to where
future projects fit in.
Representative Gara thought that the projects did not need
to be built this year and that it would be many years before
pipe is transported on the roads. He wanted to see as many
roads as possible built with federal dollars. Mr. Richards
clarified that one of the challenges was the time constraint
of the preliminary environmental and design work. The goal
is a gas pipeline by 2018. There are six construction
seasons left for the necessary preliminary highway work, if
the pipeline construction begins in 2015. Postponing the
highway construction could increase the cost of the pipeline
construction.
Representative Gara expressed confusion about pushing the
project through by 2018, when some delay might enable the
use of federal dollars. Mr. Richards stated that the 2018
date is TransCanada's projection. The projects could go
forward with federal dollars if they were unlimited. He
spoke to the benefit of using the general fund.
5:00:07 PM
HB 4001 was HEARD and HELD in Committee for further
consideration.
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.
5:03:01 PM
Vice-Chair Stoltze MOVED to ADOPT work draft #25-LS17557\E,
Kane, 7/31/08, as the version of the bill before the
Committee. There being NO OBJECTION, it was so ordered.
SUZANNE ARMSTRONG, STAFF, REPRESENTATIVE KEVIN MEYER,
explained the work draft, sectional analysis:
· Section one pertains to the Power Cost Equalization
(PCE) program containing the formula as it appeared
in the original version of HB 4005 with a few
modifications. Modifications including the lowering
of the ceiling rate from two dollars to 75 cents a
kWh.
· Section two is a new addition to the bill proposing
to repeal the new PCE formula on June 30, 2011 and
return to the formula currently in statute.
· Section three is a work in progress, the premise
being, under HB4005 there are no new entrants to the
PCE program. The non PCE eligible utilities will
instead receive five cents per kWh for the first 500
kWh a month sold to each of the residential
consumers.
5:06:23 PM
Representative Joule asked about the impact on utilities.
Ms. Armstrong explained that all utilities would be
impacted. The bill is meant to be a two and two third year
sunset, with the five cents per kWh also repealed on June
30, 2011.
Co-Chair Meyer clarified that the initial intention was for
a two year sunset, but he wanted to make sure the decision
to continue or discontinue the program was not influenced by
an election year.
5:07:40 PM
Representative Nelson asked if Anchorage would pay six cents
per kWh if the cost of electricity was lowered by five cents
for non PCE users. Co-Chair Meyer responded that would
depend on which utility company is used. Representative
Nelson asked if there had been a "human cry" for rates to
decrease. Co-Chair Meyer stated that the electrical costs
have gone up in both urban and rural areas.
5:09:03 PM
Representative Nelson wanted a perspective of costs. She
referenced Stephen's Village, which pays over a dollar per
kWh and would be covered up to 72.5 cents, whereas Juneau
would be paying six cents per kWh. Ms. Armstrong replied
that was correct; the ceiling in the committee substitute
was seventy five cents per kWh. Co-Chair Meyer recognized
the need to go above the seventy five cents, but he
advocated a starting point. He asked that the entire
package be addressed.
Representative Kelly asked if the non PCE five cent approach
would sunset at the same time. Ms. Armstrong replied yes,
the entire PCE legislation would be addressed in the future.
5:11:09 PM
Representative Crawford thought the bill might take the
state in the opposite direction and that it would be a
disincentive to Anchorage to conserve. Co-Chair Meyer
explained that according to Chugiak, the average usage in
Anchorage is 750 kWh per month and the bill is capped at 500
kWh per month, with the incentive to keep use under 500 kWh.
The average monthly cost for electricity in Anchorage is
$100 dollars. Representative Crawford did not think it
would provide incentive to conserve.
5:14:15 PM
Representative Thomas asked if the reduction would be for
residential use only. Ms. Armstrong answered yes.
Representative Thomas pointed out that he had not heard a
"cry" for an electricity break; he noted that he had
communities that pay 85 cents per kWh showing concern. Co-
Chair Meyer asked what electricity would cost under PCE, at
50 cents per kWh.
5:16:21 PM
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
referenced the chart "Comparing Monthly Electric Bills at
Various Costs and Usage." (Copy on File).
Co-Chair Meyer clarified that if the rate was 50 cents per
kWh then it would cost 15 cents with PCE, as long as the use
was less than 500 kWh each month.
5:18:15 PM
Representative Gara discussed Anchorage qualifications; he
asked the number of those that would qualify. Ms. Armstrong
replied that the two utilities in Anchorage would not
qualify, because the bill proposes to add no new entrants to
the PCE program. Under the proposed legislation, the non
PCE utilities would qualify for the five cents per kWh for
the first 500 kWh in a month.
Representative Nelson asked for information on how much
urban Alaskans spend on their utility bill. Mr. Teal
referenced page five of the packet.
5:21:16 PM
Ms. Armstrong continued with the overview:
· Section four repeals the five cents per kWh on June
30, 2011.
· Section five, repeals two sections that appeared in
HB 152, which made the Alaska Heating Assistance
st
Program retroactive to November 1 2007.
Co-Chair Meyer stated that "with the additional $10 million
recently added to the existing federal $10 million Low
Income Heating and Energy Assistance (LIHEAP) qualifying is
now at 225 percent of the poverty level." He added that
this bill simply increases the amount lower income people
can get.
Ms. Armstrong continued with section six which, applies to
the state implementation of the Federal Low Income Heating
and Energy Assistance Program (LIHEAP) and it provides for
st
the period beginning October 1 2008 through June 30, 2011.
The per dollar value of a community heating cost point,
which is calculated under regulation may increase to an
amount of 170 dollars. Each point is calculated on a per
dollar basis allowing the department to increase this to an
amount not to exceed 170 dollars.
Representative Nelson requested further explanation.
Ms. Armstrong requested that Department of Health and Social
Services (DHSS) address how the benefits are determined for
the low income heating program. Her understanding was that
the system established the criteria, and the application
assigned points for status. The total number points were
for heating cost point value. The value is $85 dollars per
point not to exceed $170 per point.
Representative Nelson asked if this meant $85 dollars per
month. Ms. Armstrong replied that an individual may apply
st
to DHSS for the period beginning October 1 to April. The
full benefit is calculated by the department; it is not a
per month allocation, but a set amount.
Co-Chair Meyer continued that anyone who qualified for the
LIHEAP program previously will receive double the amount of
assistance than from the old program. The new program will
provide more money to those that need it.
5:28:17 PM
Ms. Armstrong continued the overview:
· Section six pertains to the Federal Low Income
Heating Assistance and how the heating cost point
will be adjusted.
· Section seven pertains to the Alaska Heating
Assistance Program and how the community heating
cost point will be increased.
· Section eight pertains to the Alaska Resource Rebate
Section, changing the amount from $1200 to $1000,
including a statement notifying recipients that the
rebate is a one time payment to qualified Alaskans.
· Section nine pertains to suspension of the motor
fuel tax.
· Remaining are effective date sections.
5:29:46 PM
Co-Chair Meyer pointed out that all the sections sunset on
June 30, 2001, with the exception of the Alaska Resource
Rebate which is a one time payment.
5:30:18 PM
Vice-Chair Stoltze commented on the conversation regarding
the legislation privileging Anchorage. He did not think the
issue was regional.
Co-Chair Meyer pointed out that the intent of the bill is to
help with four major statewide utility concerns. He admitted
that the bill needs work.
Co-Chair Chenault referenced page 4, line 25, stating "The
Department of Revenue may assess a penalty of up to $5000
against any person that fails to provide the supporting
invoices as required by this subsection." Ms. Armstrong
responded that the link was included in HB 4004.
5:33:28 PM
Representative Nelson asked the fiscal impact for each
section. Ms. Armstrong stated that fiscal notes are
currently being evaluated.
Representative Nelson referenced Section two, specifically
the five cent reduction in urban use versus the changes to
PCE. She questioned the impact of the LIHEAP program to
households. Mr. Teal stated that the graph exemplifies
payments under the heating assistance. He estimated that a
household could receive roughly $3000 from LIHEAP. Once a
household is assigned a point value, it is adjusted for
household size and income level. He referenced the chart
"Heating Assistance Benefits at Various Income Levels."
(Copy on File).
Mr. Teal stated that people in rural Alaska could receive up
to 35 points and anywhere between $1500 and $3000 depending
on their income and the area in which they reside. The
state LIHEAP program is assigned $10 million dollars. To
double benefits, the maximum benefit increased to six
thousand dollars. He concluded that without any
applications received this year, the cost was yet unknown.
5:39:00 PM
Representative Nelson understood the concept of pro rating;
however, she wanted to understand the precise cash benefit
per month to a struggling person. Ms. Armstrong responded
that there was a packet of information from DHSS indicating
scenarios of various areas in the state. When the department
worked on the passage of state heating assistance program,
they gave the estimate that 3800 additional households would
become eligible.
Representative Nelson stressed that her question remained
unanswered.
5:40:59 PM
RON KREHER, DIVISION OF PUBLIC ASSISTANCE, DEPARTMENT OF
HEALTH AND SOCIAL SERVICES explained the difficulty of
determining the actual benefit because of the nature of the
point system. A household living in a community with a
harsh climate, heating with diesel fuel, with an elder or
child under the age of five could receive the maximum number
of points, given this piece of legislation. That could mean
$6000 per household. Depending on the heating cost needs,
the purpose is to off-set costs. He explained that there is
a lot of variability depending on the household income and
living situation.
Representative Nelson referenced page 2 and the average
payment of two separate Alaskan communities. She asked if
the payment was made each month. Mr. Kreher replied that
one payment was made per heating season, with one heating
season per year.
5:43:23 PM
Representative Gara commented on providing state money to
everyone in a utility below 15 cents a kWh. He wanted to
see the state spend resources for those in the greatest
crisis. He did not agree with giving state money to everyone
in a utility below 15 cents per kWh.
5:44:44 PM
Ms. Armstrong referenced the cost analysis handout. She
requested further explanation of the handout by Mr. Teal.
5:45:25 PM
Mr. Teal noted the cost model in column one, which is the
existing program with the floor at 12.83 cents and the
ceiling at 52.5 cents, with a cost of $32 million. This
would all go to currently qualified utilities, without any
new entrants. He explained that column one exemplifies the
program as it currently exists. The program is currently
funded at $28 million. Column two shows what will happen if
fuel and electric prices increase, and the legislature
provides supplemental funding. The program costs will go up
to approximately $42 million. Then PCE reimbursements would
be pro-rated. It was necessary to raise the ceiling to two
dollars, because currently, nobody has an electric cost of
two dollars. With no ceiling, the program would cost about
58 million dollars. The floor becomes a critical factor when
the large urban utilities are included. The only ones that
qualify with this floor are Golden Valley, Kodiak, Homer,
Copper Valley, and Kake with $15 million allocated to these
newly qualified utilities and $58 million going to the
existing utilities. Because there were new entrants and it
was important to keep the costs the same as the existing
program, the floor was raised. These were policy calls aimed
at keeping costs contained. These are not policy
recommendations, but merely an attempt to keep costs even.
If the program is extended to all urban utilities, with a
slightly reduced ceiling of 75 cents, there is a reduction
in payments to currently qualified utilities and an increase
in payments to the newly qualified.
5:52:01 PM
Representative Gara asked for clarification on the increase
to the cost of the program to $65 million, through giving
utilities five cents per kWh if they are under 15 cents per
kWh.
Mr. Teal responded that the urban utilities are many times
larger, which explains the increased cost. Representative
Gara reiterated his question. Mr. Teal responded that every
new utility that qualifies receives five cents per kWh.
5:54:06 PM
Representative Gara asked about the expense for each of the
utilities that charge less than 15 cents. Mr. Teal explained
the method for adding up the cost.
5:54:35 PM
Co-Chair Meyer clarified the question as "what is the state
spending on those who pay less than 15 cents per kWh."
5:55:20 PM
Representative Thomas noted that Kake Tribal Corporation is
mistakenly misrepresented in the provided handout in regards
to cost per kWh in Kake. Mr. Teal explained that this
information was provided by the Regulatory Commission of
Alaska (RCA) and is not completely accurate. It needs to be
cleaned up.
5:57:08 PM
Representative Joule pointed out that there is an anomaly,
as the North Borough would not be able to take advantage of
the subsidy because they do not pass along the costs to
their customers. He would like to find a way to make sure
that they can be reimbursed like the other utilities.
Co-Chair Meyer agreed that the incentive to conserve and
efficiency should always be at the forefront.
5:59:38 PM
Representative Hawker referenced conflicting testimony over
the weekend between the Alaska Village Electric Cooperative
(AVEC) and Alaska Energy Authority (AEA) regarding revolving
loan funding. He wanted representatives from those
organizations to come in to clarify. It would be very
helpful if the fiscal notes included per capita estimated
benefits of the programs, especially from an objective
source such as the departments.
Vice-Chair Stoltze asked for clarification.
Co-Chair Meyer noted that the revolving loan fund was never
resolved and he was not sure that the PCE fund had been
resolved either. He asked if the new portion included in the
bill would come from the discussed PCE fund or from the
general fund.
Ms. Armstrong thought that would be up to the committee. She
described that there is an appropriation in HB4003 for
additional funds to PCE.
6:02:38 PM
Representative Crawford asked about the motor fuel tax
suspension, noting the amount of paperwork created. At eight
cents per gallon, there is minimal benefit for the amount of
paperwork required to get reimbursements. He thought that
making a direct payment may be an easier way to arrive at
the same goal.
Co-Chair Meyer asked for clarification.
Representative Crawford explained. The other point he wanted
to make concerning diesel and aviation fuel. He wondered if
a direct payment might make more sense.
6:05:39 PM
JERRY BURNETT, DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF REVENUE, explained the various tax
rates on different kinds of fuel. Marine fuel is taxed at 5
cents per gallon, aviation gasoline is 4.7 cents per gallon,
and jet fuel is 3.2 cents per gallon. The federal government
funds the department for the cost of tracking these taxes.
The positions for tracking and collecting of motor fuel tax
are funded by the federal government through their tax
collections, so there is not a general fund cost to do this.
Representative Thomas asked if the marine fuel tax at five
cents per gallon was shared with the municipalities.
6:06:45 PM
Mr. Burnett answered that there is not a tax sharing with
anything except for the aviation fuel portion sold at
municipal airports.
Representative Thomas asked if the state would be
subsidizing the non-resident fishermen by suspending the
motor fuel tax.
Representative Gara commented on a gasoline study showing
that refiners set their price based on what they know
Alaskans would have to pay if importing gas from the lower
48 state. He asked whether the refiners or the dealers pay
the motor fuel tax to the state. Mr. Burnett replied that
the motor fuel tax is collected at the distributer level
when it is sold to retailers.
Representative Gara stated that refiners base their charge,
not on what it costs them to refine fuel, but what they know
they can charge given the alternative of shipping gas up
from the lower 48. He maintained that once the eight cents
is suspended, the refiners will just add it back on. Mr.
Burnett could not speak to what refiners or distributors
would charge for their fuel. He asserted that, in other
states where motor fuel tax has been removed, gas prices
have fallen as a result.
Representative Gara pointed out that other states are not
1,000 miles away from the nearest refinery source. He
requested information to dispute the finding that gas
refiners charge what they know they can, based on how much
it would cost to import gas from the lower 48. Mr. Burnett
did not have any information to dispute that.
Representative Gara stated that he did not want to give
money to the refiners. Mr. Burnett responded that there is
some competition on the market. Not all fuel is sold by one
refiner or distributor, so he believed that with the motor
fuel suspension, there would be a price effect.
Representative Gara asked for the administration's analysis
before the suspension was implemented. He felt there was no
credible information that the savings will make it to the
consumers. Mr. Burnett was not familiar with the study and
therefore did not have a response.
Co-Chair Meyer pointed out that Anchorage is a competitive
market so that if one distributer removed the eight cents,
the others would have to as well. Representative Gara asked
who pays the tax. Mr. Burnett replied that the tax is
collected at the distributer level when the retailer
purchases it from the distributer. The wholesaler is adding
the tax to the price when the retailer buys it from the
wholesaler.
6:12:39 PM
Co-Chair Meyer requested that members attempt to achieve a
balance between urban versus rural, and low income versus
middle income. He encouraged awareness regarding the five
cent credit per kWh portion of the PCE enabling a $25
dollars per month savings in Anchorage, and $300 dollars per
month benefit in some rural areas. He recommended a new
draft based on comments. He recommended that amendments be
taken.
Representative Nelson requested follow up on Representative
Hawker's suggestion regarding the bulk fuel revolving loan
fund. Ms. Armstrong offered to speak with Ms. Sarah Fisher-
Goad at the Department of Commerce, Community and Economic
Development, and attempt to get in touch with Ms. Meer
Kohler of AVEC for input.
Representative Gara wanted the administration to testify on
behalf of a plan to bring the savings from the gas tax to
the consumer. He wanted to see an analysis by the
administration. Co-Chair Meyer agreed that an analysis
would be important, because if the tax were suspended, the
consumer would expect to see an eight cent savings.
6:16:51 PM
Representative Thomas commented on the Railbelt energy area
where 63 percent of the people live, and only 27 percent
live in the rural area. He stated that one-third of the 27
percent don't drive. Co-Chair Meyer responded that aviation
and marine fuel are also included in the tax suspension.
6:18:06 PM
Representative Gara suggested the committee find out how
much the state would pay by suspending the gas tax, and then
put it into another program that would benefit Alaskans.
Co-Chair Chenault commented that gas tax raises about $40
million dollars. Mr. Burnett agreed.
Co-Chair Chenault asked where the eight cents goes.
6:19:04 PM
RANDALL RUARO, SPECIAL ASSISTANT, OFFICE OF THE GOVERNOR
believed that consumers will see most of the savings. One
reason he cited was the competitive market. If a retailer
was not lowering their price then they would sell less gas.
The proposed suspension will benefit particularly the urban
areas. He referred to a study of a gas suspension in the
year 2000 in Indiana and Illinois, which determined that 60
to 80 percent of the savings were being passed on to the
consumers. He pointed out that they had worked on an
amendment to insure that the savings pass through.
6:20:58 PM
Representative Gara understood that other states administer
the tax in a way that the cost actually goes back to the
consumer. Refiners are charging by what it would cost to
bring gas up from the lower 48 states. Refiners that pay
the gas tax probably will not reduce the gas price.
Instead, they will say "go get it from the Lower 48." The
retailers are not paying the gas tax. He questioned if
refiners are basing the charge on the cost to bring gas from
the Lower 48, how the money will be passed to consumer.
Mr. Ruaro added that the distributors have a line item for
the eight cent a gallon tax. The line items would be on
their invoices so the retailers will be paying less,
allowing them to pass the savings on. Representative Gara
projected that the company selling the gas to the retailer
will raise their price by eight cents prior to selling it.
Mr. Ruaro thought that the language of the amendment would
insure that the savings are passed on.
Representative Gara suggested that retailers pay the gas tax
so the savings gets back to the consumer. Mr. Ruaro
disagreed and thought that the saving would be passed on, to
the consumer with the help of an amendment. Representative
Gara wanted to know that the disagreement was based on a
study. Mr. Ruaro stated that the amendment would be
sufficient, but it would not be perfect. The only guarantee
in the bill is that if we do not suspend the tax, then
Alaskans will continue paying it.
6:24:27 PM
Vice-Chair Stoltze spoke to the surcharge and questioned the
effect on businesses that did not want to raise prices. He
had spoken with some business owners in favor of the gas
suspension because even if it did not result in a savings,
the business owner might not have to increase the price or
add a surcharge.
6:26:27 PM
Co-Chair Chenault wondered if the provision on page 4, line
25 is new or in existing law. Mr. Ruaro observed that the
provision is new and is intended to ensure the savings is
passed on to the consumer.
Co-Chair Chenault noted that the Tesoro refinery in his
district does not benefit from the high price of oil. Most
Kenai gas stations buy gas from Tesoro.
6:28:50 PM
Representative Crawford observed that competitive market
forces do not exist in Alaska outside of Anchorage. He did
not think an eight cent tax cut would be passed to
consumers.
6:30:39 PM
Representative Hawker stressed that the overriding objective
is efficient, equitable, and effective legislation and that
benefits the consumer. He expressed concern about moving the
bill out too quickly.
6:33:30 PM
Representative Thomas questioned if the cap on PCE would be
raised.
Co-Chair Meyer agreed that the next CS would exhibit a
higher PCE cap.
Representative Nelson observed that Ms. Meer Kohler,
President of (AVEC) had communicated earlier today that she
supported raising the cap to $1.15.
Co-Chair Meyer pointed out that the provision has a sunset
and can be fine tuned in future years.
6:35:54 PM
Representative Gara observed that Alaska is paying the
highest gas prices in the nation, even though refinery costs
are not the highest in the nation, given the cost they are
paying for oil. He offered to present the study at a later
date, which he had been referring to throughout the
committee meeting (analysis by Professor Burman at the
University of Alaska in Anchorage).
Co-Chair Chenault expressed concerns with the gas tax. He
would like to see the high price of gas be addressed in this
bill as well. Many Alaskans have to commute to work, and he
said that it does cost a "small fortune" to fill up some
vehicles.
6:38:23 PM
Representative Kelly requested that page two, line 25, be
changed to "an electric utility whose customers receive a
power cost subsidy under this section." He suggested this
to eliminate confusion that "we are somehow in the PCE
program."
Ms. Armstrong stressed that the mentioned section is a work
in progress. She is working with her legal drafting team to
clear it up. Representative Kelly suggested a floor or a
date to prevent driving the kWh cost below what it has been
for years.
Representative Kelly noted concern that in the future, the
Legislature will be considered less beneficial and promote
less self reliance than it appears. He worried specifically
about the LIHEAP increase and how that will be handled in
the future, and he worried about the total amount that
eventually might be taken away and the pain this might cause
some Alaskans. He encouraged legislators to seriously
consider programs that will be carried into the future.
6:43:12 PM
Representative Gara asked about the amendment process moving
so quickly. Co-Chair Chenault did not know if it would
happen in one day. Representative Gara requested an extra
day. Co-Chair Chenault could not make that commitment.
Representative Crawford asked if the Committee would be
required to submit amendments tonight. Co-Chair Chenault
offered to take amendments.
6:45:11 PM
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, understood that there were questions
regarding AVEC's need for a loan for fuel purchases vs. the
bulk fuel revolving loan fund.
Representative Hawker noted that he had raised that
question. He hoped for a round table discussion with AVEC
and Ms. Goad, with the goal of sorting the issue out.
Co-Chair Meyer asked that there be teleconference discussion
between Ms. Fisher-Goad and AVEC.
Ms. Fisher-Goad understood that AVEC had a loan requirement.
The question was whether the requirement was for an
amendment for the bulk fuel revolving loan fund or not.
Because of the loan amount needed, it will be a $20 million
dollar loan vs. our $500 thousand cap for a bulk fuel
revolving loan fund. The fund has come in to existence for
smaller communities where typically a borrower wouldn't have
the ability to ask a private bank for a one year loan. She
offered to work with the staff to add the issue outside of
the bulk fuel program. Representative Hawker wanted that
question answered and to have AVEC testify.
6:49:55 PM
Representative Gara referenced the handout from AHFC
regarding the question of how to maintain the rebate
program, which AHFC had estimated at $60 million dollars.
6:51:35 PM
Co-Chair Meyer requested that amendments be drafted for the
next meeting. He requested that all the players be present
to answer the questions.
HB 4005 was HEARD and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 6:51 P.M.
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