Legislature(2021 - 2022)ADAMS 519
04/08/2022 01:00 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB168 | |
| HB170 | |
| HB307 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 9 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 168 | TELECONFERENCED | |
| += | HB 170 | TELECONFERENCED | |
| += | HB 307 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 8, 2022
1:03 p.m.
1:03:33 PM
CALL TO ORDER
Co-Chair Merrick called the House Finance Committee meeting
to order at 1:03 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Kelly Merrick, Co-Chair
Representative Dan Ortiz, Vice-Chair
Representative Ben Carpenter
Representative Bryce Edgmon
Representative DeLena Johnson
Representative Andy Josephson
Representative Bart LeBon
Representative Steve Thompson
Representative Adam Wool
MEMBERS ABSENT
Representative Sara Rasmussen
ALSO PRESENT
Senator Robert Myers, Sponsor; Representative Grier
Hopkins, Sponsor; Joe Hardenbrook, Staff, Representative
Grier Hopkins.
PRESENT VIA TELECONFERENCE
Alan Weitzner, Executive Director, Alaska Industrial
Development and Export Authority, Department of Commerce,
Community and Economic Development; Jeff Schub, Executive
Director, Coalition for Green Capital; Bert Hunter, Chief
Investment Officer, Connecticut Green Bank; Curtis Thayer,
Executive Director, Alaska Energy Authority, Department of
Commerce, Community and Economic Development; Elena
Sudduth, Manager, Customer Service and Marketing, Interior
Gas Utility, Fairbanks.
SUMMARY
HB 170 ENERGY INDEPENDENCE PROGRAM & FUND: AIDEA
HB 170 was HEARD and HELD in committee for
further consideration.
HB 307 EXTEND BOND AUTH FOR INTERIOR ENERGY PROJ
HB 307 was HEARD and HELD in committee for
further consideration.
SB 168 DONATIONS/GIFTS FOR DOT&PF SIGNAGE
SB 168 was REPORTED out of committee with eight "do pass"
recommendations and two "no recommendation" recommendations
and with one previously published zero fiscal note: FN1
(DOT).
Co-Chair Merrick reviewed the meeting agenda.
SENATE BILL NO. 168
"An Act relating to program receipts; and relating to
the acceptance of gifts, donations, and grants for the
purpose of providing signage for assets under the
control of the Department of Transportation and Public
Facilities."
1:04:36 PM
Co-Chair Merrick noted that the committee had previously
heard the bill on April 4, 2022, and she had received no
amendments. She asked if the sponsor had any opening
comments.
SENATOR ROBERT MYERS, SPONSOR, thanked the committee for
hearing the bill.
Representative Thompson asked if the signage had to be paid
for before a naming bill was passed. Senator Myers replied
in the negative. He elaborated that when the naming bill
was drafted it would state whether signage would be paid by
the general fund (GF) or by a third party.
Representative Wool asked if an effect of the bill would be
that a signing bill without associated non-GF funding may
have a harder time passing and it would become an expected
prerequisite for a naming bill. He understood that the
funding was generated after a naming bill passed and not
concurrently. Senator Myers stated his understanding of the
question. He deemed that it would depend on how the sponsor
presented the bill. He thought there were risks both either
approaches and could see a scenario where the donations
fell short.
1:08:16 PM
Co-Chair Foster MOVED to REPORT SB 168 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
SB 168 was REPORTED out of committee with eight "do pass"
recommendations and two "no recommendation" recommendations
and with one previously published zero fiscal note: FN1
(DOT).
1:08:49 PM
AT EASE
1:10:36 PM
RECONVENED
HOUSE BILL NO. 170
"An Act establishing the Alaska energy independence
program and the Alaska energy independence fund in the
Alaska Industrial Development and Export Authority;
and providing for an effective date."
1:10:43 PM
ALAN WEITZNER, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT (via teleconference),
provided a PowerPoint presentation titled Alaska Energy
Independence Fund (AK EIF) (copy on file). He noted that
the fund was commonly referred to as a "green bank" and
that the bill proposed a loan program within Alaska
Industrial Development and Export Authority (AIDEA) that
was not operated as a bank.
1:11:38 PM
Mr. Weitzner began on slide 2 titled "AIDEA Mission
To promote, develop, and advance economic growth and
diversification in Alaska by providing various means of
financing and investment.
AIDEA OVERVIEW
Investing in Alaskans since 1967
Alaska's Development Finance Authority
Financially Self-Sustaining Public Corporation (no GF
by statute AS 44.88.190(b))
$446 million in Dividends declared to Alaska since
1997
Directed over $3.5 billion into economic development
in Alaska
?Revenue generated by AIDEA's investments go to two
places:
1.reinvested in AIDEA programs and projects and
2.issued as dividends to the State of Alaska.
?AIDEA works with Alaska's communities and businesses
to advance your economic development
priorities.
?Projects must meet two important criteria:
1.be a sustainable financial investment; and
2.create tangible benefits for Alaska and
its communities.
Mr. Weitzner highlighted that AIDEA was the state's
financing authority and existed as within the Department of
Commerce, Community and Economic Development (DCCED) as a
public corporation.
1:13:30 PM
Mr. Weitzner moved to slide 3 titled "AIDEA AS 44.88
It is in the public interest to promote the prosperity
and general welfare of all citizens of the state by:
(A) stimulating commercial and industrial growth and
expansion by encouraging an increase of private
investment by banks, investment houses, insurance
companies, and other financial institutions,
including pension and retirement funds, to help
satisfy the need for economic expansion;
(B) creating the Alaska Industrial Development and
Export Authority with the powers necessary to
accomplish the objectives stated in this paragraph,
including the power to issue taxable and tax exempt
bonds, to acquire ownership interests in projects, and
to provide development project financing?
WITHIN AS 44.88.010 (a)(11)
it is in the state's interest to import private
capital to create new economic activity that would not
otherwise take place in the state.
Mr. Weitzner illuminated that AIDEA had the authority to
institute the AK EIF. He believed that AIDEA's statute held
the foundational elements for creating and establishing a
loan program like the AK EIF.
Co-Chair Merrick recognized Representative Grier Hopkins in
the audience.
1:15:25 PM
Mr. Weitzner moved to slide 4 titled AIDEA Programs &
Projects:"
Conduit Revenue Bond Program
Loan Participation Program
Development Project Finance
Sustainable Energy Transmission and Supply (SETS)
Arctic Infrastructure Development Fund(AIDF)
Small Business Economic Development Revolving Loan
Fund
Rural Development Initiative Loan Fund
Business Export Assistance Program
Mr. Weitzne reminded the committee that AIDEA was
established in 1967 specifically to issue Conduit Revenue
Bonds and had expanded over time. The reason for the
expansion into broad platforms was due to the limited
capacity for broad investment in the state. The corporation
was a key driver for initiating private investor
partnerships for economic development within the state. He
conveyed that AIDEA had 82 positions (PCNs) which were
split between AIDEA and the Alaska Energy Authority (AEA);
AEA's employees were titled under AIDEA. He added that both
agencies had shared service employees for duties like
accounting and Information Technology (IT) services. There
were 27 AIDEA employees focused on the broad platforms the
agency offered across the state.
1:17:09 PM
Mr. Weitzner turned to slide 5 titled "AIDEA & AEA:
Alaska Industrial Development and Export Authority
Mission: To promote, develop, and advance economic
growth and diversification in Alaska by providing
various means of financing and investment.
Alaska Energy Authority
Mission: To reduce the cost of energy in Alaska. AEA
is Alaska's energy office and lead agency for
statewide energy policy and program development.
The purpose and function of the AK EIF aligns with
AIDEA's existing scope establishing loan programs,
working with Alaska's financial sector and private
investors, as well as managing capital funds, such as
the Loan Participation Program (Enterprise Development
Account) and Development Project Financing (Economic
Development Account).
AIDEA would oversee loan programs and financial
management in partnership with AEA's energy and
technical subject matter expertise, leveraging
existing shared infrastructure and services.
An independent, five-person advisory board would
provide guidance on investment opportunities to AIDEA
and AEA. The advisory board's authority would not
supersede the governing authority of the AIDEA/AEA
Board.
Mr. Weitzner indicated that the bill was a function of how
AIDEA and AEA worked together. They shared common
functions, a common board, and broadly collaborated to
facilitate projects like HB 170 and others. He noted that
both agencies' missions complemented each other. The Energy
Independence Fund aligned with AIDEA's scope and
diversified Alaska's economy by creating a key new sector
for service companies focused on renewable or clean energy
development within the state and aligned with AEA's mission
of reducing the cost of power. The bill added staff to AEA
and AIDEA to accomplish the program. He noted he had been
joined by his colleague Curtis Thayer, Executive Director,
Alaska Energy Authority, Department of Commerce, Community
and Economic Development, who could answer questions
regarding the collaboration.
Mr. Weitzner advanced to slide 6 titled "Total Energy." He
discussed that the need for AK AIF was related to unique
issues in Alaska; energy consumption and the cost of
energy. The slide depicted Alaska as ranked fourth among
states in per capita energy consumption and was currently
in the top five for energy expenditures per capita. He
noted that Louisiana was included in the top 5 states for
both categories because it was a high energy producing
state with a large industrial base that utilizes energy.
The other states had high energy capacity or use due to
weather, location, and transportation issues. Louisiana was
a very high energy consuming state with the highest per
capita energy costs across the United States (US).
1:20:32 PM
Representative Wool asked about the consumption per capita
table depicted on slide 6. He wondered whether it took into
consideration the full production of North Slope oil
divided by Alaska's population. Mr. Weitzner answered that
it was the consumption within Alaska, and the extent that
the state utilized refined crude oil. The data was not
based on the total amount of crude oil shipped externally.
Representative Wool asked about the expenditure per capita
table. He asked how the data accounted for the expenditure.
Mr. Weitzner replied that the numbers were an aggregation,
formulated by the United States Department of Energy of all
the costs of consumption for residential, commercial, and
industrial sectors. He noted that nergy consumed producing
oil on the North Slope was included. The data included a
break down by the three specific categories and the slide
depicted the aggregate data.
1:22:32 PM
Mr. Weitzner turned to slide 7 titled "Initial
Capitalization and Funding.He illuminated that the
Coalition for Green Capital was a main resource for AIDEA
in formulating the legislation. The agency examined how
different green banks were established to determine the
proper size in Alaska. He studied the New York,
Connecticut, and Montgomery County green banks. He noted
that the Montgomery County green bank had a small Gross
Domestic Product (GDP) component, but it was very active.
The other green banks were compared to Alaska's GDP,
population, and the total energy consumption per capita to
define what the correct amount of capitalization was needed
to initiate the program that would grow via leveraging
participation with local financial institutions. He pointed
to the Targeted Private Capital Leverage Ratio portrayed on
the slide's table and explained that the success of the
green banks was through the way they worked with local and
national financial institutions to leverage public
investment in the green bank. He reported that the New York
green bank had a 6 to 1 leverage ratio of private capital
to public capital. The Connecticut green bank enjoyed an 8
to 1 leverage, and the Maryland Montgomery County Green
Bank had a 7 to 1 ratio. He anticipated a $10 million
initial capitalization from UGF that would subsequently
grow the same level of leverage from Alaska's financial
institutions.
1:25:34 PM
Mr. Weitzner turned to slide 8 titled "Economic Benefits of
the AK EIF He offered that the principal benefit of a
green bank could lower the cost of energy. Through language
concerning sustainable energy development, the bill focused
on the industrial and commercial needs in key urban centers
and remote and rural communities. He deduced that it
ultimately lowered the cost of living within the state,
made the state more attractive to families, and created
jobs within the clean energy sector. He noted the program
aligned with AIDEA's mission of diversifying the state's
economy which created employment and increased
discretionary income.
1:27:39 PM
Mr. Weitzner moved to slide 9 titled conomic Benefits of
the AK EIF. The slide depicted the savings and
opportunities if the program achieved certain levels of
energy reduction. The agency estimated the state could save
up to 10 percent on total annual energy costs or $780 on
average per person and at 30 percent savings it could
potentially reduce annual energy costs by over $2 thousand
per Alaskan.
Representative Wool asked for the average annual cost of
energy per Alaskan without the industrial component. He
inquired what the average cost for the residential Alaskan
was. Mr. Weitzner answered that he did not have the answer
but would follow up in writing with the information.
Co-Chair Merrick noted the information would be distributed
to the committee.
Representative Carpenter asked what sustainable energy may
look like with the result of 10 percent energy savings and
30 percent savings and how was that achievable. Mr.
Weitzner replied that the savings would be felt by
individual consumers and businesses via lower monthly
utility costs. He relayed that in Alaskan urban centers, on
average residential energy costs were $0.14 to $0.16 per
kilowatt hour, which would be reduced and turned into
discretionary income that would be reallocated to other
expenses. He added that for businesses the cost savings
for utilities could be used to expand the business. He
stated that the largest benefit came in for rural
communities that were reliant on diesel and the fluctuating
cost of oil. Rural communities would directly benefit
through energy efficiency provided by sustainable energy
that resulted in lower energy costs. He offered to provide
more detailed information related to rural communities'
energy costs.
1:31:29 PM
Representative Carpenter cited the information on the
slide, "Frees up approx. $570 million to $1.7 billion in
discretionary spending every year He inquired whether the
$570 million was associated with a 10 percent savings and
the $1.7 billion reflected a 30 percent savings. Mr.
Weitzner directed attention to slide 6 showing the
Department of Energy total consumption per million BTU at
839 million BTU as the average consumption per capita of
735,000 average residents based on the expenditures per
capita of $7.797 thousand and noted that was the data used
to produce the savings projected on slide 9. Representative
Carpenter did not intend for Mr. Weitzner to do the math
currently. He wanted to understand the slides. He was
trying to figure out if the numbers were a correlation
between the 10 percent and 30 percent savings depicted and
the $570 million to $1.7 billion numbers. Mr. Weitzner
answered in the affirmative.
Representative LeBon referenced the Fund Capitalization
fiscal note, published number 5 and the reference to a $30
million initial investment. He noted slide 9 referred to a
$20 million investment. He inquired whether the $10 million
investment was separate from the fiscal note. Mr. Weitzner
replied that there were two fiscal notes; one was passed
out of the House Labor and Commerce Committee (HL&C) at $30
million and the initial fiscal note was appropriated at $10
million. Representative LeBon asked for verification that
the $10 million was seed money to launch the program funded
through Undesignated General Funds (UGF). Mr. Weitzner
replied affirmatively. Representative LeBon asked how the
$30 million played into the situation. Mr. Weitzner
deferred to the Co-Chairs of the HL&C committee since the
amount was amended in committee.
1:35:43 PM
AT EASE
1:36:38 PM
RECONVENED
Representative LeBon noted that the fiscal note was a prior
request from the governor for $30 million. He stated that
he would remain focused on the $10 million amount.
Mr. Weitzner turned to slide 10 titled "Alaska Energy
Independence Fund
Overview
"An Act creating the Alaska energy independence
fund in the Alaska Industrial Development and
Export Authority; and providing for an effective
date."
Make capital more accessible to borrowers for
sustainable energy development projects.
Partner with private capital to fund businesses and
projects, including energy-efficiency, renewable
power, micro-grid, transportation, sustainable
agriculture, and more.
Incentivize co-investment in the non-fossil fuel
energy sector between the public (the State of Alaska
through AIDEA in partnership with Alaska Energy
Authority), Alaska's financial sector, private
investors, and philanthropic donors.
Aligns with the proposed federal bills, including the
new definition of "sustainable energy development".
Mr. Weitzner illuminated that the definition of sustainable
energy in the bill was very broad and was inclusive of many
types of projects.
1:38:38 PM
Representative Josephson referenced sustainable energy
development or clean energy. He noted the definition in
the bill was very broad and included sun, wind , water, and
30 biological processes. He was told that other states had
a more prescriptive definition and employed tighter
guiderails on hydro and biomass. He had heard the
Connecticut model used the term low impact hydro" in its
definition. He inquired about the broader definition of
sustainable energy, particularly for water, in the
legislation than the Connecticut model. Mr. Weitzner
highlighted that in consultation with the Coalition for
Green Capital, the agency looked for the broadest
terminology that would work under the defining federal
legislation to provide the most opportunity in the state.
He observed that Alaska had unique energy requirements. He
agreed that other states had tighter definitions related to
clean energy. He elaborated that Alaska had "different
issues" and a green bank offered an opportunity to lower
the cost of power and create green bank benefits by
increasing diesel generation efficiency levels and reducing
consumption where diesel energy worked in support of an
alternative micro-grid. He offered that other state's
approached the definition to preclude that type of
development. Alaska's rural energy environment called for a
definition that could offer broader benefits to the state's
consumption. He deferred to the coalition and Connecticut
Green Bank to further answer the question.
1:42:00 PM
JEFF SCHUB, EXECUTIVE DIRECTOR, COALITION FOR GREEN CAPITAL
(via teleconference), He shared that the Coalition for
Green Capital (CGC) was a national nonprofit focused on
supporting all levels of government in implementing and
operating public clean energy finance institutions. The
coalition had partnered with the state for several years to
help develop the bill. He addressed Representative
Josephson's question. He explained that every state defined
eligible technologies differently. The foundation of every
state's technological focus was solar, building efficiency
and upgrades. Other technologies were employed but most of
the focus was on distributed solar and building efficiency
and upgrades representing the largest market opportunities
and demand therefore, contractor availability and
established "channels" drove the investment. He disclosed
that there was pending federal legislation to capitalize a
$20 billion green bank that was supported by the president
and passed the House of Representatives. The national green
bank would be a central national fund to help create local
green banks. The funding had limits and constraints on the
kinds of technologies that could be financed. He informed
the committee that former Representative Don Young was a
co-sponsor of the bill and enjoyed a "fantastic
partnership" with the coalition. He indicated that passage
of the bill would drive much more funding to green banks
and the HB 170 proposal.
1:45:32 PM
BERT HUNTER, CHIEF INVESTMENT OFFICER, CONNECTICUT GREEN
BANK (via teleconference), spoke to clean energy and how it
was defined in Connecticut. He reiterated that each state
took a state specific view of clean energy that benefitted
and impacted their state. He relayed that Connecticut took
an expansive view of clean energy except for low impact
hydropower. Connecticut listed clean energy as solar,
geothermal, wind, ocean thermal energy, fuel cells,
landfill gas, low impact hydro, and other energy resources
and emerging technologies that had significant potential
for commercialization and did not involve the combustion of
coal, petroleum, or petroleum products, nuclear fission,
etc. The definition also included electric vehicles (EV)
and charging infrastructure, and alternative fuel vehicles.
He spoke to low impact hydro because of the many small
rivers in the state.
Representative Wool referenced the limits on non-carbon and
non-fission in the definition and asked if the limits were
included in HB 170 as well. He provided an example of micro
nuclear reactors or clean coal.
Mr. Weitzner answered that the bill language was crafted to
incorporate what Representative Wool had exemplified. The
focus was on the unique energy needs of the state and
energy efficiency to lower the overall cost of power. The
bill did not attempt to limit or define what could be
covered through loan programs. He restated that the purpose
of the legislation was to create a loan program through
AIDEA with technical support from AEA and working with the
private sector on ways to improve clean energy investment
and energy efficiency investment in all communities. The
energy programs needed support from local communities and
financial institutions and was broadly available to
industrial, commercial, and residential consumers of
energy.
1:50:24 PM
Representative LeBon cited slide 10 and inquired how the
Alaska banking community including credit unions were
partnering on the project and what the state's expectations
were for the state's financial sector. Mr. Weitzner
answered that they saw the project as directly working with
the state's financial institutions. He asked for
elaboration by Mr. Hunter.
Mr. Hunter furthered that Connecticut Green Bank (CGB)
partnered with community banks and credit unions to
implement a loan loss reserve so the financial institutions
could provide loans to support the investment by home
owners for renewable energy and energy efficiency. He
reported that over the eight years the program had been in
operation it had resulted in over $90 million in loans
provided to homeowners in Connecticut. The loss reserve had
only paid out $150 thousand, which was 0.2 percent in total
and not per annum. He emphasized that the high performance
of the loans allowed them to attract new customers to
financial institutions. The green bank was "popular" with
Connecticut's financial institutions and relayed to bankers
that the green bank was established to partner with private
capital and not to displace what the institutions did but
to enable them to participate in the clean energy economy.
He furthered that $2.3 billion was invested in the state
using only $300 million of public resources.
1:53:40 PM
Representative LeBon asked if Mr. Hunter was familiar with
the Community Reinvestment Act (CRA) requiring banks to
invest in their communities. He wondered if participation
in green banks could qualify banks for CRA points. Mr.
Hunter replied in the affirmative. He qualified that the
organization had studied the issue extensively with the
Connecticut Banking Commissioner to determine that as long
as the investment was located in the qualifying CRA census
tracks it did count.
Representative Wool referenced slide 10 related to the
second bullet point stating "Incentivize co-investment in
the non-fossil fuel energy sector?" and the bolded language
sustainable energy development He also cited Mr.
Weitzner's answer to a prior question stating clean coal
would be eligible. He wanted to clarify that was the case.
He knew the bill was not called a green bank whereas other
states did call it a green bank" not related to fossil
fuel or greenhouse gases. He reiterated his question
whether the bill was eligible for a fossil fuel project.
Mr. Weitzner answered in the affirmative and added that
sustainable energy development was broadly defined to
address the unique energy requirements in the state.
1:55:45 PM
Mr. Weitzner turned to slide 11 titled "ALASKA ENERGY
INDEPENDENCE FUND (AK EIF) and discussed financing and
investments:
Financing and Investments
The Fund would leverage its capital alongside Alaska's
financial sector to enhance total investment in
Alaskan clean energy programs and projects.
Eligible to make loans, provide credit enhancement
structures, purchase loans, provide development
funding and other forms of financing for sustainable
energy development in Alaska's commercial,
residential, and industrial market sectors.
The Fund would consist of appropriations made by the
legislature, loans or other assets transferred to the
Fund by AIDEA, unrestricted loan payments, interest,
or other income earned on loans, investments or assets
of the fund, and available federal funding.
Mr. Weitzner explained how the initial capitalization
within AIDEA and financial institution investment would be
utilized. He noted that through the collaboration with CGB
and the CGE it highlighted how the loan programs could be
put in place. He highlighted that another important element
of the bill was the establishment of an advisory committee
with members from across the state that included members
from financial institutions. The committee would advise how
to put the loan programs together to facilitate reaching
the need and examine the best practices of how to grow it
through successful green banks. He stressed that the role
of public finance was in credit enhancement, loan loss
reserves, and creating elements of structuring that worked
with local financial capital for residential, industrial,
and commercial users. The relationships with the existing
financial sector was important to establish the best uses
of the loan program for the utilizers and the ability to
build onto the capital base with different programs. The
appropriation to capitalize the fund was the foundation
capital that would create the structures to expand the loan
programs.
1:58:45 PM
Mr. Weitzner advanced to slide 12 titled rogram
Workflow." The slide depicted AIDEA's role with the initial
capitalization of the fund. The agency would solely utilize
the fund for green bank programs and establish underlying
investment vehicles that worked directly with the local
financial institutions and create the different loan
programs. The programs were structured to meet a certain
issue and the loans were structured for the specific
programs.
2:00:01 PM
Mr. Weitzner concluded the presentation on slide 13 titled
"Functions of the Fund." He maintained that the program
would address issues that created barriers to investment or
perceived higher risk. Therefore, AIDEA would create
structures that provided credit enhancement to financial
institutions. In addition, the agency would establish
broader pools or coalitions to address inefficiencies of
scale by aggregating small projects to meet scale to
attract private capital. He delineated that another barrier
to investment was first-in-kind transactions where AIDEA
would work with AEA on technical support to address the
issue. Another barrier was marginal economics, and the
agency would work to enhance service sector businesses
through co-investment with AIDEA.
Representative Edgmon thanked Mr. Weitzner and others for
the presentation. He used the infusion of federal money to
improve the state's broadband for comparison. He took a
bit of umbrage with the term independent in the bill. He
was familiar with the state's energy issues and stated that
the only way Alaska could become energy independent was
through development of its natural gas. He opined that
those other forms of energy would be a marginal
contribution to energy independence. He clarified that he
was not making negative comments about the bill but
wondered how the word independence" became associated with
the legislation and wondered why not merely call it a green
bank or clean energy fund. He asked Mr. Weitzner to help
convince a rural resident how a $10 million capitalized
fund tied to financial returns from the private sector
would get rural Alaska energy independent without natural
gas. Mr. Weitzner replied that the term independence came
from the idea that Alaskans could make an independent
decision on their own energy choice by undertaking a loan
for energy efficiency or source solar panels. He maintained
that the bill enabled Alaskans to make their own
independent choices on their energy resources and that was
how the word was included. He noted the House Labor and
Commerce Committee had changed the name to the lean
Energy Fund
2:05:18 PM
Representative Edgmon asked why the entire effort was not
being tied to goals, objectives, and outcomes. He
referenced broadband as a comparison that had goals and
outcomes. He supported the venture, but he thought the bill
was being overstated in some ways. Mr. Weitzner agreed
there was not independence in the existing policy as
written. The reference was written to policy targets for
clean energy that the legislature had enacted and thought
that the term would align through creating economic
diversity. Representative Edgmon liked the fact that the
bill had a clean energy program and an advisory board. He
emphasized that there were no goals and objectives tied to
the legislation. He ascertained that the bill was a banking
bill under the moniker of energy, he characterized it as
"sort of clean energy, but it's really not clean energy
because it's economic development first." He did not think
HB 170 was the complete package. Mr. Weitzner answered that
the administration had principally focused on the green
bank legislation in other states that had been successful
and attempted to tailor the programs to how it would
function within AIDEA and Alaska's statutes. It had been
the driving force of the legislation.
2:08:10 PM
Representative Edgmon appreciated the legislation. He saw
an environment in rural Alaska where diesel would rule in
rural Alaska for many years. He remained unconvinced that
an Anchorage bank would provide a loan with a 9 to 1
leverage ratio and change things in rural Alaska.
Representative Carpenter referenced independent decisions
by Alaskans to put solar panels on their rooves. He deduced
that the many feet of snow that fell on houses in the
winter reducing solar panels to function for only 6 months
out of the year would likely be a bad investment for many.
He stated that the "devil was in the details" regarding
what technologies would work. He deduced that it was
unknown whether traditional or alternative energies would
work. He wondered what the bill was trying to accomplish.
He understood the concept and it sounded beneficial to put
$10 million in a fund to eventually generate $570 million
to $1 billion of savings in the future. He was uncertain
what technologies were implied or possible. He stated that
if it was left up to the decisions by individuals, he could
not envision the complete plan. He favored lower cost
energy but admitted that the most reasonable way to drive
down the cost of energy in the state was through natural
gas. He deemed that another focus was a "distraction
2:11:06 PM
Mr. Weitzner responded that if the bill created energy
efficiency within the definition of sustainable energy
development and reduced the amount of energy consumed but
still met demand the savings would occur. He recounted that
the way a green bank and the proposed fund worked was
through a loan program that made low cost financing
available that enabled consumers to make their own energy
choices. The bill incentivized capital and made it
available for consumers desiring to lower their costs and
monthly spend on energy consumption. The loan programs
would offer cost effective financing for the individual. He
noted that energy efficiency could include other forms of
energy; however, wind, solar, and hydro products were
developing via micro-grids in rural communities that
reduced overall diesel consumption. He asked if Mr. Schub
could explain how existing green banks were effective.
Mr. Schub interjected that the number one investment
through green banks was in energy efficiency in buildings
(representing over 50 percent of all green bank investments
across the country) to lower the energy cost no matter what
energy source was used. He maintained that the first and
cheapest way to lower energy cost was to use less energy
via installation of energy efficiency measures. He
emphasized that it was not a question of whether more clean
energy or fossil fuel based energy was installed the goal
was helping to lower energy costs as much as possible. He
indicated that considering the energy situation in the
state, lowering energy costs through building efficiency
was clearly the largest market opportunity. He agreed there
was not a specific plan in the legislation. He elaborated
that very few green bank bills in the country included
specific investment plans in the legislation. The
institutions were meant to respond to market inputs and
consumer demand. The market need and existing opportunity
among consumers and installers drove where the investment
went, which tended to be energy efficiency. He expected
energy efficiency to be the main focus of the program.
2:15:23 PM
Representative Carpenter thought he had heard earlier the
bill was not creating a green bank. He asked if the bill
was creating a green bank. Mr. Schub replied that he had
used the term too casually and it was an over generalized
term.
Representative LeBon deduced that the banking community had
to be "on board" for the program to succeed. He referenced
slide 13 that cited project risk, credit enhancement,
providing loan loss reserves, reduced risks, allow longer
terms at lower rates, etc. He asked if the Alaska Bankers
Association had weighed in formally on the program. Mr.
Weitzner answered that AIDEA had met with the association
several times on the topic and provided information. He had
not seen any formal opinion by the association.
Representative LeBon spoke to the importance of knowing
where the banking community stood on the program for it to
succeed.
2:17:19 PM
Representative Wool voiced that he agreed with
Representative Edgmon's statements. He noted that the
committee had a presentation recently on the Infrastructure
Investment and Jobs Act (IIJA) funding [February 3, 2022
and April 7, 2022]. He recalled that the Alaska Housing
Finance Corporation (AHFC) was appropriated a significant
amount of money for energy efficiency. He deemed that HB
170 was in competition with IIJA funding that was free and
not a loan program and there were currently many programs
for energy efficiency. He understood the bill was not
called a green bank because some of the included projects
were not very "green." He asked whether fossil fuel
projects were acceptable in other states with green banks.
Mr. Schub responded that some of the institutions were not
referred to as green banks, some were called clean energy
funds or clean energy access funds. Some green banks
allowed certain projects to hook into a central utility for
natural gas. He recalled that across the green bank system
none of the projects had financing for fossil fuel
projects. He related that the main reason was much existing
financing was available for fossil fuel projects. Green
bank projects were economically viable but structural
financial barriers prevented private capital from financing
them on their own, which was not the case for fossil fuel
projects.
2:20:43 PM
Mr. Hunter interjected that CGB financed projects that used
fossil fuels regularly. He elucidated that the types of
projects were replacing low efficiency gas boilers with
high efficiency gas boilers or natural gas conversions. The
green bank also supported combined heat and power where the
fuel source was fossil based, principally natural gas. He
relayed that it was his state objective to get to a net
zero in power generation by 2040 and the goal was to wean
the state off natural gas to the extent practicable. There
was no oil or shale in Connecticut and CGB would not be
permitted to use funds for extractive purposes or pipeline
investment.
Representative Wool supported any energy efficiency
improvement, whether it involved hydrocarbons or not. He
acknowledged the unique energy challenges in Alaska. He
interposed, in relation to Representative Carpenter's
remarks that snow on a roof was very reflective and was not
bad for solar panels.
2:23:53 PM
Mr. Weitzner stated that Representative Wool was correct
that through IIJA there was significant amount of grant
funding and he expected it was the funding of first choice
for communities. He elaborated that the funding allocated
to Alaska Housing Finance Corporation (AHFC) for energy
efficiency was restricted to residential use. The funding
did not benefit the industrial and commercial consumers in
the state. The development of the green bank was intended
to offer cost effective financing over the long haul.
2:25:16 PM
Representative Josephson asked if the administration
considered having the AEA operate the program when drafting
the bill. He deduced that the program aligned more with
AEA' core mission and it currently offered loans and grant
programs. Mr. Weitzner responded in the affirmative. The
authority to create a green bank like funding program was
contained in AIDEA's statutes. The ability to engage with
the financial community existed in AIDEA's authority. The
technical components were under the purview of AEA. It's
grant and loan programs were administered through AIDEA's
staff. He deferred to AEA for further clarification.
CURTIS THAYER, EXECUTIVE DIRECTOR, ALASKA ENERGY AUTHORITY,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT
(via teleconference), concurred with Mr. Weitzner's
remarks. He cited discussions that concluded the bill was
primarily a finance bill for infrastructure and economic
development and better fit within AIDEA. The bill included
AEA where it augmented the program, especially concerning
rural Alaska. He noted that AEA operated the Power Cost
Equalization (PCE) program and was responsible for
powerhouses, bulk fuel, and alternative energy in roughly
200 rural Alaskan communities. He emphasized that AEA's
expertise laid in rural Alaska.
Mr. Weitzner elaborated on Representative Josephson's
question. He indicated that energy was an area that AIDEA
often collaborated with AEA.
Representative Josephson deduced that many of the
alternative energy projects would exist in rural Alaska. He
asked if there had been any consideration given to
expanding the capitalization of the Renewable Energy Fund
since the template already existed. Mr. Weitzner answered
that the focus had been on establishing legislation that
would facilitate federal and state funding to grow a green
bank in Alaska, which better fit AIDEA's purview. He
addressed Representative Josephson's comments regarding
where the projects would occur. He explained that energy
efficiency benefitted all areas of the state; urban and
rural. He reported that the AK EIF could support programs
like the Commercial Property-Assessed Clean Energy (CPACE)
program that existed in urban areas and support programs
providing equivalent support in rural communities. He
deferred to Mr. Hunter for further clarification.
2:30:40 PM
Mr. Hunter expounded that the investments would be specific
to individual states. He restated that most of CGB
investments were for individual buildings; residential,
commercial, and industrial. He reported that 40 percent of
greenhouse gas emissions were generated from the building
sector, roughly 35 percent were from the transportation
sector. The CGB was focused on those two areas,
approximately 60 percent of the funding was for solar, and
the balance was in general energy efficiency.
2:32:12 PM
Co-Chair Merrick handed the gavel to Vice-Chair Ortiz.
Representative Thompson relayed that a few years ago the
University of Alaska in Fairbanks replaced its 50 year old
coal generated power plant to a more energy efficient coal
power plant. The coal plant cut the emissions by 50
percent. He wondered if a similar project would be eligible
under the bill.
2:33:23 PM
Mr. Weitzner replied that the use of coal under the energy
efficiency umbrella would be eligible under the
legislation. He qualified that the type of investment
necessary for such a large project would not likely fit
within the AK EIF program.
Representative Carpenter asked whether AIDEA had the
authority to use its own funding to capitalize the fund or
if GF was necessary. Mr. Weitzner responded that the
legislation proposed that the initial funding was
appropriated via Unrestricted General Funds (UGF), but
AIDEA receipts could be used to grow the program. He
explained that all the various funds within AIDEA were
initially capitalized via state appropriation. In addition,
all green banks were initially funded through public
funding representing the public policy support for the
program. He highlighted that AIDEA's funds were
legislatively defined as being separate from the funds of
the state. The state's initial appropriation for HB 170
would be made outside of AIDEA's dividend covenant. He
delineated that as a development finance authority AIDEA
was able to issue debt in its own capacity via statute and
needed to establish independent financial integrity with
credit rating agencies.
2:36:40 PM
Representative Edgmon spoke to the issue of seed funding
and the contemplation of an initial $10 million to get the
project going. He asked if there had been an analysis on
initially capitalizing the fund at $40 million to $100
million to build the relationship with the banking
community. He pondered why $10 million and not $50 million.
Mr. Weitzner highlighted slide 7 showing a comparison
between existing and successful green banks based on GDP
and the level of initial funding and they had identified
$10 million as the appropriate amount of initial capital to
allow growth over time. He elaborated that he wanted to
take a conservative approach in the level of initial
funding in case the fund was not able to grow as quickly as
anticipated to avoid AIDEA incurring additional reporting
obligations by the legislature.
Mr. Hunter interjected that he supported AIDEA's position
for a conservative approach. He asked everyone to keep an
open mind on the topic, particularly in the near future. He
believed the effort would be tremendously successful if it
passed. He offered perspective from the CGB's experience.
He reported that CGB repurposed $70 million from the
state's clean energy fund into its capital base and the
legislature appropriated one tenth of one penny to the
green bank from all electric bills in the state that
totaled $27 million annually as well as a share of its cap
and trade carbon emissions programs providing $3 million
annually. Connecticut granted $100 million in seed capital
to CGB in a state with a population of 3.5 million. He
reported that the CGB had 45 staff and invested the balance
in transactions. The green bank had bonding authority to
issue taxable and tax exempt bonds. During its last bond
issue, CGB attracted $100 million in bids for $25 million
in available bonds and half of the bonds were purchased by
citizen investors across the state and nation. He was
certain Alaska's program could attract the additional
investment. He emphasized that it was important to have a
good capital base because the rating agencies would look at
the sustainability of the bonding entity. He declared that
"the endeavor would be rewarded for being bold." The key to
CGB's success was its capable staff, the flexibility of its
enabling statutes, and a strong capital base, which
empowered it to attract significant amounts of private
capital. He stated that "it takes money to make money" and
the saying applied to clean energy projects. Connecticut
Green Bank $250 million balance sheet represented an
endowment for the benefit of the state's citizens. He
stressed that no private equity investors were walking away
with CGB's investment it belonged to the citizens of the
state. He asserted that Alaska's program would be
investments for the citizens of the state and not give
aways."
2:42:42 PM
Representative Edgmon referenced the phrase "underserved
communities" in the bill. He asked if the term was defined
in statute. Mr. Weitzner could not recall the answer and
would follow up in writing. Representative Edgmon
discovered that there was a definition in the CRA, which
was referenced earlier by Representative LeBon that was a
federal banking act relative to underserved communities. He
referenced broadband and noted that the federal definition
of unserved versus underserved was explicitly defined. He
admitted that he was biased and represented southwest
Alaska and was "struggling" to understand how the bill
could accomplish anything for rural Alaska. He noted that
existing green banks were tied to the transportation and
building sectors. He guessed that the issues of rural
Alaska were not conducive to private investment.
2:45:06 PM
Vice-Chair Ortiz referenced existing green bank funds
developed across the country. He asked if fuel cell
technology had been integrated anywhere with green bank
funding. Mr. Hunter replied affirmatively. He elaborated
that CGB invested $200 million in fuel cells in
Connecticut. He noted that the state was home to two fuel
cell manufacturers; Fuel Cell Energy and Doosan. He noted
that the third fuel cell manufacturer was Bloom
Technologies in California. He furthered that the
Connecticut companies used natural gas as its feed stock
and would eventually transfer to using clean hydrogen
within 5 to 7 years when it was fiscally sustainable.
Mr. Weitzner interjected that the definition of sustainable
energy development in HB 170 incorporated fuel cell
technology and anticipated it to be largely a micro-grid
component.
Representative Wool asked how AIDEA would inform the public
about the programs and if it provided support to interested
homeowners.
2:48:25 PM
Mr. Hunter used Connecticut as an example. He highlighted a
statewide program called Energize CT that was the
umbrella organization the partnered with CGB and the
state's electric and gas utilities which provided all the
information regarding all of the state's energy programs
and served as one central source of information. He
furthered that when CGB started there were 6 different
websites; it was confusing and stymied the uptake of
investment. The situation instigated the collaboration that
created the Energize CT Program. The utilities and CGB also
employed social media and the green bank had an informative
web page for its programs and bonding. The green bank also
reached out to contractors to offer training and updates
for the programs it offered. He explained that once
contacted by the homeowners, the contractor assessed the
problem, defined the solution, and matched it with the
proper financing program.
2:51:26 PM
Representative Wool stated he was curious about the Alaska
specific approach. He noted all of the programs Alaska had
to offer and wondered how the information could reach
people and how they could navigate through the information.
He asked if Alaska had a similar entity to Connecticut's
Energize CT. Mr. Hunter responded that he offered his
remarks as guidance for Alaska, since the state did not
currently have a similar program to disseminate
information. He noted that green banks in other states set
up a similar way to inform the public.
Mr. Weitzner added that Representative Wool made an
excellent point. He reiterated that there was not a central
point of information dissemination of all the programs the
state offered. He stated that the bill did not solve the
problem but AIDEA would look to incorporate a centralized
information system. In regards to the issue for rural
Alaska, he informed the committee that in Section 2 of the
bill; AS.44.83.055 created an analyst position within AEA
who's role would solely be to work with and educate
Alaska's rural communities regarding the programs and how
to access Alaska's AK EIF programs.
2:55:06 PM
Representative Carpenter provided a scenario. He
exemplified an Alaskan homeowner who wanted to upgrade
their windows or heating system through federal or state
programs, or bank loans. He wondered if the capacity
currently existed. He asked the same question regarding a
business. Mr. Weitzner answered that currently programs
existed in different levels of capacity. He elaborated that
it depended on the borrower's loan capacity. He noted that
there were programs through AHFC for residential owners.
Regarding businesses, the programs also depended on the
businesses' loan capacity. He voiced that the intent of
Alaska's program was to create additional avenues that did
not rely solely on the individual's capacity to take on
debt.
HB 170 was HEARD and HELD in committee for further
consideration.
2:58:01 PM
AT EASE
3:12:09 PM
RECONVENED
HOUSE BILL NO. 307
"An Act relating to the financing and issuance of
bonds for a liquefied natural gas production system
and natural gas distribution system; and providing for
an effective date."
3:12:18 PM
REPRESENTATIVE GRIER HOPKINS, SPONSOR, introduced the
legislation. He read from a prepared statement:
I'm pleased to offer HB 307 - a simple bill that is
part of a long-term, comprehensive, and paradigm-
shifting solution to a difficult problem.
In 2009, the U.S. Environmental Protection Agency
(EPA) designated portions of the Fairbanks North Star
Borough (FNSB) as a nonattainment area for air quality
related to PM2.5. Since that time, the communities of
Fairbanks and North Pole, State of Alaska, AIDEA and
the Interior Gas Utility have been actively engaged in
expanding the availability and use of natural gas
through the Interior Energy Project, a project
designed to bring lower-cost energy to as many
Interior residents and businesses as possible, as
quickly as possible.
A critical component of the Interior Energy Project or
IEP is financing for the development of a unified
public gas utility with competitive rates. SB 23 was
passed by the 28th Alaska Legislature in 2013 giving
the Alaska Industrial Development Authority (AIDEA)
the ability to provide financing tools for the
development of the IEP, including the ability to issue
up to $150 million in conduit revenue bonds to help
develop an integrated natural gas supply chain,
including expansion of natural gas liquefaction
facilities in the Matanuska-Susitna Borough and
expansion of natural gas mains and service lines in
Fairbanks and North Pole.
Authorization for issuing these bonds was originally
scheduled to expire June 30, 2018. Through the efforts
led by Rep. Thompson and former Senator Pete Kelly -
the Alaska Legislature extended access to AIDEA
bonding an additional five years to June 30, 2023.
Given market conditions and turmoil related to the
COVID-19 pandemic, IGU has paused the final investment
decision on its Titan liquid natural gas (LNG) plant
expansion project located in the Mat-Su Borough, which
will necessitate access to AIDEA bonds.
Bonds of $136 million of the original $150 million
authorized may be issued to provide up to the $275
million financing cap authorized under SB23.
HB 307 extends the authorization for AIDEA to issue
IEP-related bonds for an additional five years to June
30, 2028.
Members will find in their packets letters of support
for HB 307 from AIDEA as well as the Fairbanks North
Star Borough and the January 2022 quarterly report
from AIDEA to the legislature on the progress of the
IEP.
JOE HARDENBROOK, STAFF, REPRESENTATIVE GRIER HOPKINS,
provided a sectional analysis on the bill (copy on file):
Section 1:
Amends the uncodified law of the State of Alaska
enacted in 2013 to replace the expiration date of the
authority of AIDEA to issue bonds in support of the
project from June 30, 2023, to June 30, 2028.
Section 2:
Contains an immediate effective date.
Representative Carpenter wondered how the current
announcement of a natural gas pipeline from the North Slope
to the Interior of Alaska impacted the IEP.
Representative Hopkins replied that the IEP project
expanded natural gas lines throughout the Fairbanks area.
He emphasized that the Fairbanks area needed to be ready
for the time the gas line was completed. He explained that
when more affordable gas was supplied from the North Slope
customers would pay a lower interest rate through their
utility bill by extending the bonding authority and
expanding the infrastructure.
Co-Chair Merrick moved to invited testimony.
ELENA SUDDUTH, MANAGER, CUSTOMER SERVICE AND MARKETING,
INTERIOR GAS UTILITY, FAIRBANKS (via teleconference), was
in favor of HB 307. She related that AIDEA and the Interior
Gas Utility (IGU) had been working closely on all aspects
of the IEP that included liquefaction, transportation,
storage, regasification, and distribution of natural gas.
She listed the ways both entities had advanced the project.
Fairbanks Natural Gas and IGU had consolidated into one
natural gas utility to extend the availability of lower
cost energy to as many businesses and residences as
possible. She delineated that approximately 215 miles of
natural gas distribution lines had been installed to the
core non-attainment areas of Fairbanks and the North Pole.
In Fairbanks, 1,550 residential and commercial customers
were using natural gas. The natural gas utility could serve
8,500 properties if everyone with access to natural gas
mains converted. The North Pole distribution lines served
125 customers with the main lines reaching 3,000 commercial
and residential properties. She furthered that AIDEA and
IGU had been working on two storage projects. There was a
5.25 million gallon Liquified Natural Gas (LNG) storage and
gasification facility that was completed in Fairbanks in
late 2019 and a separate 150,000 gallon LNG storage and
gasification facility completed in the North Pole in 2021.
The IGU's customer base had increased about 40 percent
since the storage facilities were completed and it
anticipated 600 more customers converting to natural gas
for heating in 2022. She noted that AIDEA bonding was
critical to the continuing success of the project. As the
customer base grew, IGU would need to utilize further AIDEA
bonding to add approximately 100,000 gallons per day of LNG
capacity to the present output of the Titon Liquefaction
Facility located in the Mat-Su Borough. The existing plant
had a capacity of about 50,000 gallons per day. The utility
planned to utilize AIDEA bonding to expand more natural gas
mains into more neighborhoods in the Fairbanks and North
Pole communities. The bonding authority was not fully
utilized due to the COVID-19 pandemic, resulting oil price
drop, and economic uncertainty. She anticipated needing the
bonding over the following few years. The bill provided
additional time for the IEP to progress and realize the
project's goal of affordable natural gas to as many
customers as possible.
3:22:12 PM
Co-Chair Merrick set an amendment deadline for HB 307 for
Wednesday, April 13, 2022, at noon.
Representative Hopkins thanked the committee for hearing
the bill.
HB 307 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
3:22:57 PM
The meeting was adjourned at 3:22 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 9 Intent letter to AMCO Director_lic conversion and auctions 04.04.22.pdf |
HFIN 4/8/2022 1:00:00 PM |
SB 9 |
| SB 9 Amenement Pkt. 1 - 27 040722.pdf |
HFIN 4/8/2022 1:00:00 PM |
SB 9 |