Legislature(2023 - 2024)ADAMS 519
04/08/2024 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB368 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 368 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 8, 2024
1:33 p.m.
1:33:30 PM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 1:33 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Neal Foster, Co-Chair
Representative DeLena Johnson, Co-Chair
Representative Julie Coulombe
Representative Alyse Galvin
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
Representative Mike Cronk
ALSO PRESENT
Representative George Rauscher, Sponsor; Craig Valdez,
Staff, Representative George Rauscher.
PRESENT VIA TELECONFERENCE
Brandon Spanos, Acting Director, Tax Division, Department
of Revenue.
SUMMARY
HB 368 ELECTRICAL ENERGY & ENERGY PORTFOLIO STDS
HB 368 was HEARD and HELD for further
consideration.
Co-Chair Foster reviewed the meeting agenda.
HOUSE BILL NO. 368
"An Act relating to clean energy standards and a clean
energy transferable tax credit; and providing for an
effective date."
1:34:59 PM
REPRESENTATIVE GEORGE RAUSCHER, SPONSOR, read the sponsor
statement (copy on file):
In the wake of a looming gas availability shortage in
the Cook Inlet basin, critical for powering Alaska's
Railbelt from Homer to Fairbanks, this Committee Bill
on Clean Energy Standards and a Clean Energy
Transferable Tax Credit serves as a cornerstone for
our energy policy. It is an urgent and needed measure,
pivotal for steering Alaska towards a sustainable and
secure energy future amidst these challenges.
This legislation not only signals a shift to a more
diversified and resilient energy mix but also
establishes a strategic framework for economic growth
and sustainable stewardship. By setting forth clean
energy standards we are crafting a blueprint for
innovation and transition, guiding our state towards
needed energy solutions that will broaden and help
diversify energy, and will keep Alaska economically
viable.
The introduction of a clean energy transferable tax
credit is a key feature of this bill, designed to act
as a catalyst for clean energy projects. This
initiative is of paramount importance, as it opens
avenues for leveraging both federal and private
investment in Alaska's energy sector. It creates a
fertile environment for public-private partnerships,
ensuring that the path to energy independence is both
collaborative and multifaceted. Additionally, this
bill acknowledges the role of existing low-sulfur coal
facilities, incorporating them into the broader
framework of clean energy solutions to enhance their
contribution to Alaska's energy portfolio.
As a conservative advocate, I highlight this bill's
crucial role in stabilizing the market, essential for
investors across sectors including Cook Inlet gas,
clean energy, manufacturing, and heavy industry. By
establishing a consistent policy framework, we
mitigate investment risks and ensure ratepayers aren't
burdened by costs. This legislation instills
confidence among stakeholders, showcasing our
dedication to a predictable market that attracts
investment, advancing Alaska's energy transition and
economic prosperity.
I call upon my colleagues and partners from all
sectors to support this vital legislation. Together,
we can establish a stable, diversified energy market
that benefits all Alaskans, ensuring our state remains
a beacon of innovation, economic strength, and
sustainable growth for generations to come.
1:38:20 PM
CRAIG VALDEZ, STAFF, REPRESENTATIVE GEORGE RAUSCHER, went
through the sectional analysis (copy on file):
Section 1: Uncodified Law
Adds a new section to the uncodified law of Alaska,
which establishes the purpose of this Act, which is to
set a clean energy portfolio standard for electric
utilities, increasing percentages of their net
electricity sales from clean energy sources.
Section 2: AS 42.05.381
Introduces a new subsection (p) under AS 42.05.381,
setting a uniform service rate for the transmission of
clean energy generated after July 1, 2024. To be
developed by the
Railbelt Electric Reliability Organization, subject to
approval by the RCA.
Section 3: AS 42.05.780
Amends AS 42.05.780(a) to say that an integrated
resource plan must now identify the most cost-
effective strategies for the energy network to satisfy
the clean energy standard.
Section 4: AS 42.05.785
Amends AS 42.05.785(a) by adding subsection (4)
stipulating the construction of large energy
facilities may not be detrimental to a load-serving
entities ability to meet the CES.
1:44:01 PM
Mr. Valdez continued:
Section 5: AS 42.05 Article 11A. Clean Energy
Portfolio Standard.
Sec. 42.05.900 Clean Energy Portfolio Standard
(a) Adds section (a) to AS 42.05, establishing the
clean energy portfolio standard and detailing
percentages for clean energy sources. with a gradual
increase over a specified timeline.
Sec. 42.05.920 Exemptions
(a) Exempts individual load-serving entities from
compliance if the overall grid is meeting the Clean
Energy Portfolio Standards.
(b) Allows for exemption for a load-serving entity
from its first noncompliance period.
Sec. 42.05.925 Net Billing
(a) Sets standards for net billing and export rate
credit.
(b) Charges the RCA to establish regulation to set the
ERC annually based on seasonal and time variations,
and other relevant factors.
Sec. 42.05.930 Additional Energy Resources
Requires the AEA to submit a report at least every 5
years to the legislature to recommend if any new
technologies are to be added to the definition of
Clean Energy.
Sec. 42.05.935. Definitions
This section lists the definitions of terms used in
this bill.
1. "Clean Energy"
2. "Clean Energy Standard"
3. "Compliance Period"
4. "Distributed Energy Systems"
5. "Independent Power Producer"
6. "Interconnected Electric Energy Transmission
Network"
7. "Load- Serving Entity"
8. "Railbelt"
9. "Renewable Energy Resource"
10."Transmission Network Constraint"
Section 6: AS 42.45.110 Costs used to Calculate PCE
This section amends AS 42.45.110(a) to stipulate that
revenue from recovered heat is not to be included.
Section 7: AS 43.98 Clean Energy Transferable Tax
Credit
Clean Energy Transferable Tax Credit, Article 5
(a)Sets the foundation for the clean energy
transferable tax credit, sets transparency standards
for those provided the tax credit.
(b)Allows clean energy transferable tax credits to be
sold, assigned, exchanged, conveyed, or otherwise
transferred in whole or in part.
(c) Allows the credit to be used to offset taxes in AS
10.25 and Title 43.
(d)Instructs the department of revenue to adopt
regulations necessary for administrating the Tax
Credits
(e) Sets the requirement that a clean energy
transferable tax credit be used within 5 years.
(f) Restricts a clean energy transferable tax credit
from reducing a person's tax liability below zero.
(g)Allows holders of clean energy tax credit
certificates to combine or split their credits for
transactions like sales or transfers. The Department
must issue new certificates for combined or split
credits, detailing their amounts and expiration dates.
This process doesn't extend the credits' validity
period.
Section 8: AS 44.83.940. AEA, Report New Subsection
(b) Section (b) mandates that the authority must
submit an annual report to the legislature's first
regular session, detailing progress on rural clean
energy development.
This report should evaluate current initiatives,
identify needed infrastructure, and assess the
feasibility and costs of future projects.
Section 9: Effective Date Clause
July 1st, 2024.
1:48:50 PM
Mr. Valdez introduced the PowerPoint presentation "House
Bill 368 Electrical Energy & Energy Portfolio Standards"
dated April 3, 2024 (copy on file). He continued to slide
2, Alaskas Energy Landscape, which provided a map of
load regions in the Railbelt. He advanced to slide 3,
Combined Utility annual Demands and commented that the
higher risk uncontracted natural gas demand would increase
overtime. He turned to slide 4, which showed a chart
illustrating a $65 million cumulative statewide total of
how many CE tax credit dollars would be created through
2051.
Mr. Valdez turned to slide 5, ENSTAR Presentation, Key
Considerations:
None of the Options meet the LNG demands for the 4-
year milestone (first gas 4Q2027)
The second worst thing for Alaska is to import LNG.
The worst thing is to do nothing.
Mr. Valdez continued to slide 6, HN 368, a Legislative
Response:
HB 368 is a proactive legislative measure aiming to
establish a Clean Energy Portfolio Standard &
Introduce Clean Energy Tax Credits to leverage private
funding and close production gaps.
Diversifying Alaska's energy portfolio with clean
energy sources not only extends the life of Cook
Inlet's natural gas reserves for critical heating
needs but also offers gas producers a definitive
roadmap for the future, enhancing their capacity for
strategic planning and investment.
Mr. Valdez concluded with slide 7, Bottom Line: HB 368s
Impact on Alaskas Future:
Energy Security: Strengthens Alaska's energy
independence by diversifying supply sources, reducing
reliance on Cook Inlet gas.
Economic Growth: Stimulates the economy by creating
jobs in the clean energy sector and attracting
industries seeking sustainable operations.
Legislative Leadership: Showcases Alaska's proactive
approach in energy policy, setting a benchmark for
sustainable and forward-thinking legislation.
Public-Private Partnerships: Encourages innovative
collaborations, driving both clean energy initiatives
and broader industrial development.
1:53:16 PM
Representative Hannan referred to slide 3. She queried the
definition of the acronym IGU.
Mr. Valdez responded that IGU meant Interior Gas.
Representative Hannan asked whether Interior Gas was a
private company contributing to Golden Valley, or separate
entity.
Mr. Valdez responded that IGU was a utility that provided
gas.
Representative Hannan asked about the Uncontracted
Available Cook Inlet bar on the graph. She asked who
defined what was available but uncontracted.
Mr. Valdez responded that it was gas that DNR thought was
potentially available in Cook Inlet but was currently
uncontracted.
1:55:35 PM
Representative Ortiz referred to FN3 and asked for a
breakdown of the projected $176.6 in costs in FY27 through
FY30.
Mr. Valdez responded that continuing costs would be for
personal services going forward. He said that the beginning
costs would be the adoption and amending of regulations.
Representative Ortiz stated that the bill talked about tax
credits, which typically meant less revenue for someone; he
asked which party would experience the revenue loss.
Mr. Valdez responded that passage of the bill would mean
less revenue for the state under Title 43. He said that
savings would be passed onto the ratepayers.
Representative Ortiz asked whether there was an estimate as
to ratepayer savings.
Mr. Valdez responded that the closest modeling would be the
predicted $65 million by 2051.
1:59:39 PM
Representative Stapp queried the tax figure per kilowatt
hour under current statute.
Mr. Valdez responded that the tax under AS 10.25 was quite
low, which was the reasoning for morphing it into a
transferrable tax credit. He thought that $1.75 million in
taxes was currently paid to the state under the statute.
Representative Stapp thought that if industry was currently
paying $1.75 million per year, the graph was not correct.
He asked how industry could receive a $3 million dollar tax
credit for only paying $1.75 million in taxes per year.
MR. Valdez responded that the credits could be transferred
to another entity, which would apply to anything under
Title 43.
Representative Stapp asked how it was possible to transfer
more tax credits than what was paid in taxes.
Mr. Valdez responded that the entity would receive a tax
credit that could be sold or transferred to another entity
that paid taxes in the state, like an oil company, who
could then use the credits.
Representative Stapp questioned language in the bill that
stated that school districts could apply for clean energy
transferable tax credits regardless of whether the energy
would be sold to an unrelated person and that the school
district was entitled to the same amount of credit as a
loan serving entity.
Mr. Valdez responded that the language was added as a
potential for certain school districts in rural areas that
used their own power and to ease extreme energy costs. He
relayed that in some districts a significant part of their
budget was for heating and electricity. He related that if
a district chose to do so, it could get a contract with an
ITP, or build an energy system themselves, and transfer the
credits to receive the tax credit.
Representative Stapp felt the bill was unclear about where
the school should be located in the state. He saw a
reference to PCE and wondered whether the bill would apply
to putting solar panels in Lathrop High School in
Fairbanks. He asked whether the school could then discount
the power or sell the power back to Golden Valley Electric.
Mr. Valdez responded that it was a possibility.
Representative Stapp asked about subsection E and whether
schools in the state received PCE.
Mr. Valdez responded that school districts did not receive
PCE.
2:04:40 PM
Representative Stapp understood that schools did not
receive PCE, schools would get $0.03 credit, transferable
to $0.01, and could sell the power and get the discount
from rural utility.
Mr. Valdez responded that the subsections b and e were
different. He explained that subsection e said that a
facility that qualified for the tax credits under B of the
section could receive additional 0.01 kilowatt.
Representative Stapp asked why the waiver section was
written into the bill.
Mr. Valdez responded that the waiver was a holdover from
older legislation that gave participants a way out if
planning fell through.
Representative Stapp asked what was being waived.
Mr. Valdez responded that under the waiver there would be
no penalty for exiting the program.
2:07:13 PM
Representative Josephson asked about the Sectional Analysis
and Sec 42.05.925. He asked about export credit rate.
Mr. Valdez responded that the export credit rate (ECR)
would be the amount received for selling energy back to the
grid.
Representative Josephson asked whether ERC at the top of
page 3 of the sectional was a typo.
Mr. Valdez responded in the affirmative.
2:08:24 PM
Representative Galvin asked why there was a move from
lowering the clean energy standards from the year 2040 to
2051.
Mr. Valdez said that the dates had been chosen because they
were realistic goals according to the utilities. He added
that the dates were also based on completion of transition
lines.
Representative Galvin understood that it was too much money
on the rate payers to move the state quickly enough to
achieve clean energy standards by 2040.
Mr. Valdez responded that the increased expense to rate
payers would be a risk.
2:11:13 PM
Representative Galvin noted she had an April 5, 2024,
letter from Chugach Electric in which the company listed
six concerns about the bill. The concerns ranged from the
ERO to Bradley Lake, and double taxing and cost recovery.
Mr. Valdez responded that he had not seen the letter.
Representative Galvin agreed to provide a copy.
Mr. Valdez asked whether the letter was from the utility
board.
Representative Galvin shared that the letter was from the
CEO of Chugach Electric.
2:13:35 PM
Co-Chair Foster requested that the letter be distributed to
the entire committee.
Representative Coulombe asked about the Summary of Changes
(copy on file). She spoke to Change 1:
This delated the original subsection (h) on page 4,
lines 12-20. This removed the voluntary optout
provision from the bill. This was decided to be
unneeded by utilities to protect their ratepayers
after other portions of the bill were completed.
Representative Coulombe requested further explanation of
the change.
Mr. Valdez responded that he had covered it earlier and
reiterated that the bill did not include penalties, or have
requirements set forth under penalty of law, that would
penalize the utilities, which removed the need for an opt
out option.
Representative Coulombe asked whether there were penalties
in the original legislation.
Mr. Valdez responded that there had never been penalties
written into the bill.
2:15:42 PM
Representative Hannan asked the how many utilities
currently paid taxes and the total volume of those taxes.
2:16:14 PM
BRANDON SPANOS, ACTING DIRECTOR, TAX DIVISION, DEPARTMENT
OF REVENUE, ANCHORAGE (via teleconference), responded that
he did not have the information but would follow up with
the committee. He thought that taxpayer could be C
Corporation energy companies at paid income taxes. He added
that electric co-ops also paid taxes.
Representative Hannan asked what electric co-op taxation
currently produced for the state.
Mr. Spanos responded that in FY 23, the tax collected was
$2.4 million and of the total, $49,000 went to the general
fund and 2.4 mil went to the municipalities in which the
energy had been generated. He added that there were 18
taxpayers in 2023.
2:18:14 PM
Representative Rauscher noted that the letter from Chugach
Electric mentioned by Representative Galvin had not been
written to the legislation under discussion.
Representative Galvin understood the importance of an RPS
bill. She wanted to discuss the 2040 to 2051 dates and
wondered what was happening in other oil producing states.
She thought that 2051 sounded very late in the game to get
onboard with renewable energy opportunities.
Representative Rauscher thought that the oil companies not
contributing their thoughts on the legislation was a good
thing. He suggested oil companies were busy doing other
important work. He felt that the problem faced by Alaska
was that the amount of gas currently available was in
decline. He stressed that the bill would offset and
diversity by encouraging other energy projects. He hoped
that investors would come into the state and bring with
them jobs and projects. He thought that the bill would
encourage investment in the state for energy projects
including but outside of oil and gas.
2:23:15 PM
Representative Stapp asked about page 7 line 10, which
referenced a waiver to fines.
Mr. Valdez responded that the fine language had been left
in by accident and should be deleted from the bill.
Representative Stapp thought that the bill essentially
offered a cash credit for renewable projects.
Mr. Valdez responded effectively, yes.
Representative Stapp hypothesized building a windfarm and
selling the power generated, thereby making $50 million in
tax credits over the course of time. He understood he could
sell those credits to another energy company who could then
use those tax credits to offset their production tax.
Mr. Valdez responded agreed that that was how the bill
worked.
Representative Coulombe noted that DOR said that $2.4
million in taxes were collected in 2023, $49,000 went to
the General Fund, and the rest went to municipalities. He
wondered whether the bill would take from the
municipality's shares.
Mr. Valdez responded that the tax credits would only be
applicable to the states share.
Representative Coulombe asked whether that was clearly was
stipulated in the bill.
Mr. Valdez responded that it was his understanding of how
it would work and was the intent of the bill. He added that
it was not explicit in the language of the bill.
2:26:53 PM
Representative Stapp hypothesized about using federal
dollars to build a giant windmill in the Mat-Su and then
selling the power generated to a utility and discounting
all expenses as taxes under the proposed legislation.
Mr. Valdez responded that Alaska did not use enough
electricity to offset the amount it would cost to build the
windfarm. He said that the hypothesis would be allowable
under the legislation.
Representative Josephson thought that the bill invited coal
production. He wondered whether the bill was tied to carbon
capture legislation.
Mr. Valdez responded that the way the bill was originally
written was to encourage energy diversification while
maintaining support for non-renewable energy sources. He
said that the EPA had not certified a new coal plant since
2013 but might in the future.
Representative Josephson asked whether coal bed methane was
a subset of coal. He remembered that in the past the Mat-Su
was gravely alarmed by the controversy surrounding the coal
bed in the Mat-Su.
Mr. Valdez responded that he would research the question
and get back to the committee.
Representative Josephson mentioned a Governor Palin era
reform that proposed going 50 percent renewable energy by
2030. He queried the difference between the dates proposed
in the current legislation and the ones proposed by
Governor Palin.
Mr. Valdez responded that the bill included incentives and
was being introduced at a time when the market was
acknowledging the move toward renewables. He considered
that technology had changed and was more efficient and
cheaper and those factors would create more of a change
than the aspirational goals suggested by Governor Palin.
2:31:38 PM
Co-Chair Edgmon interjected that the Parnell Administration
had set forth aspirational energy goals for the state. He
commented that in 2010 there was a bill that created an
uncodified section that was a guiding force for current
energy discussions.
Mr. Valdez added that part of the bill was to create
integrated planning, which would look at the system as a
whole and he cited Section 3, subsection a.
Representative Hannan understood that the transferable tax
credit could be transferred to any taxpayer who was paying
any kind of tax to the state.
Mr. Valdez responded it would be applicable to any tax
under Title 43 as well as 10.25.
Representative Hannan asked whether if the lack of limits
on who could gather the tax credits was part of the problem
as to why revenue could not produce a fiscal note.
2:34:20 PM
Representative Stapp asked about gas that was generated
from coal as a byproduct. He spoke of a proposed project in
North Pole that would produce synthetic gas from coal.
Mr. Valdez responded that one of the issues Alaska faced
was federal regulation. He said that the projects would
have to get through the FERC and EPA regulation process.
Representative Stapp said he was wondering if the synthetic
gas project would qualify for tax credit under the bill.
Mr. Valdez responded that he would provide the information
to the committee.
Representative Galvin mentioned letters from constituents
who were concerned about direct electric costs and whether
cost would be negatively affected. She thought that cheaper
renewable energy would lower costs but said there was
concern about costs to the ratepayer.
2:38:22 PM
Mr. Valdez replied that one of the pieces of information to
look at was the Alaska Energy Security Report from 2023. He
said that the duty was to supply affordable and reliable
energy. He believed that DOR could speak to navigating the
transferable tax credit system.
Representative Galvin spoke of energy bill scorings and
cited a March 25, 2024, policy analysis by Cassie Andrews.
She shared that the analysis had rated the outcome of the
bill at a minus 7 for energy bill scoring.
Mr. Valdez replied that he could not speak to a third-party
bloggers analysis.
Representative Galvin expressed concern that the bill would
increase the workload of the taxation division at DOR. She
queried whether one PCN for the Regulatory Commission of
Alaska would be enough and noted that no additional PCNs
had been requested for DOR.
Mr. Spanos noted that additional PCNs for the department
had been discussed. He said that the fiscal note reflected
that the department could absorb the additional expense by
automating much of the certification and credit claiming
process.
2:45:08 PM
Representative Galvin asserted that the fiscal note seemed
complicated. She asked whether setting up the automated
system would require additional resources or if the expense
could be absorbed by the department.
Mr. Spanos responded that the department already paid a
significant amount to Fast Resources, the third-party
contractor that currently maintained the system, and small
to medium changes were already built into the budget.
Representative Rauscher offered closing remarks and
reflected on the work done by the Energy Security
Taskforce.
2:48:19 PM
Co-Chair Foster reviewed the agenda for the following day's
meeting.
HB 368 was HEARD and HELD for further consideration.
ADJOURNMENT
2:49:06 PM
The meeting was adjourned at 2:49 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 368 Powerpoint (H) Finance.pdf |
HFIN 4/8/2024 1:30:00 PM |
HB 368 |
| HB 368 ChugachElectricComment SB257SB217HB307 040824.pdf |
HFIN 4/8/2024 1:30:00 PM |
HB 307 HB 368 SB 217 SB 257 |
| HB 368 DOR Response to HFIN 04.11.24.pdf |
HFIN 4/8/2024 1:30:00 PM |
HB 368 |