Legislature(2017 - 2018)BARNES 124

03/16/2018 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 329 REAL ESTATE APPRAISAL MNGMT. COMPANIES TELECONFERENCED
Heard & Held
-- Public Testimony --
+ HB 374 ON-BILL FINANCING OF ENERGY IMPROVEMENTS TELECONFERENCED
Heard & Held
-- Public Testimony --
+ SB 4 BARBERS/HAIRDRESSERS;CHEMICALS;BRAIDING TELECONFERENCED
<Bill Hearing Canceled>
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 16, 2018                                                                                         
                           3:24 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Sam Kito, Chair                                                                                                  
Representative Andy Josephson                                                                                                   
Representative Louise Stutes                                                                                                    
Representative Colleen Sullivan-Leonard                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Adam Wool, Vice Chair                                                                                            
Representative Chris Birch                                                                                                      
Representative Gary Knopp                                                                                                       
Representative Mike Chenault (alternate)                                                                                        
Representative Bryce Edgmon (alternate)                                                                                         
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 329                                                                                                              
"An  Act relating  to  the registration  and  regulation of  real                                                               
estate   appraisal   management   companies;  relating   to   the                                                               
establishment of  fees by the Department  of Commerce, Community,                                                               
and  Economic Development;  relating  to the  Board of  Certified                                                               
Real Estate  Appraisers; relating to real  estate appraisers; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 374                                                                                                              
"An  Act relating  to on-bill  financing  by an  electric or  gas                                                               
distribution   utility   for   certain  energy   efficiency   and                                                               
conservation improvements."                                                                                                     
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SS FOR SENATE BILL NO. 4(FIN) AM                                                                       
"An  Act  relating to  the  Board  of Barbers  and  Hairdressers;                                                               
relating   to  a   limited  license   to  practice   non-chemical                                                               
barbering;  relating  to a  license  to  practice hair  braiding;                                                               
relating  to the  Department of  Environmental Conservation;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
     - BILL HEARING CANCELED                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 329                                                                                                                  
SHORT TITLE: REAL ESTATE APPRAISAL MNGMT. COMPANIES                                                                             
SPONSOR(s): REPRESENTATIVE(s) JOSEPHSON                                                                                         
                                                                                                                                
02/05/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/05/18       (H)       L&C, JUD                                                                                               
03/09/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/09/18       (H)       <Bill Hearing Canceled>                                                                                
03/16/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 374                                                                                                                  
SHORT TITLE: ON-BILL FINANCING OF ENERGY IMPROVEMENTS                                                                           
SPONSOR(s): REPRESENTATIVE(s) WOOL                                                                                              
                                                                                                                                
02/21/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/21/18       (H)       ENE, L&C                                                                                               
03/01/18       (H)       ENE AT 10:15 AM CAPITOL 17                                                                             
03/01/18       (H)       Heard & Held                                                                                           
03/01/18       (H)       MINUTE(ENE)                                                                                            
03/08/18       (H)       ENE AT 10:15 AM CAPITOL 17                                                                             
03/08/18       (H)       Moved CSHB 374(ENE) Out of Committee                                                                   
03/08/18       (H)       MINUTE(ENE)                                                                                            
03/09/18       (H)       ENE RPT CS(ENE) 2DP 1NR 2AM                                                                            
03/09/18       (H)       DP: CLAMAN, WOOL                                                                                       
03/09/18       (H)       NR: JOHNSON                                                                                            
03/09/18       (H)       AM: JOHNSTON, RAUSCHER                                                                                 
03/16/18       (H)       L&C AT 3:15 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
THOMAS ATKINSON, Staff                                                                                                          
Representative Andy Josephson                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 329 on behalf of                                                                            
Representative Josephson, prime sponsor.                                                                                        
                                                                                                                                
DAVID DERRY, Chair                                                                                                              
Board of Certified Real Estate Appraisers                                                                                       
Soldotna, Alaska                                                                                                                
POSITION STATEMENT:  Testified in support of HB 329.                                                                          
                                                                                                                                
MARK SCHIFFMAN, Executive Director                                                                                              
Real Estate Valuation Advocacy Association (REVAA)                                                                              
Minneapolis, Minnesota                                                                                                          
POSITION STATEMENT:  Testified in the hearing on HB 329.                                                                      
                                                                                                                                
ROB EARL, Staff                                                                                                                 
Representative Adam Wool                                                                                                        
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 374 on behalf of                                                                            
Representative Wool, prime sponsor.                                                                                             
                                                                                                                                
GENE THERRIAULT                                                                                                                 
Alaska Industrial Development and Export Authority (AIDEA);                                                                     
Interior Energy Project (IEP)                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in the hearing on HB 374.                                                                      
                                                                                                                                
JOMO STEWART, General Manager                                                                                                   
Interior Gas Utility                                                                                                            
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 374.                                                                          
                                                                                                                                
ALEC MESDAG, Director                                                                                                           
Energy Services                                                                                                                 
Alaska Electric Light and Power (AEL&P)                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 374.                                                                          
                                                                                                                                
STUART COHEN                                                                                                                    
Interfaith Power and Light                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 374.                                                                          
                                                                                                                                
CEAL SMITH                                                                                                                      
Alaska Climate Action Network                                                                                                   
Eagle River, Alaska                                                                                                             
POSITION STATEMENT:  Testified in support of HB 374.                                                                          
                                                                                                                                
CORY BORGESON, CEO                                                                                                              
Golden Valley Electric                                                                                                          
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 374.                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:24:53 PM                                                                                                                    
                                                                                                                                
CHAIR  SAM KITO  called  the House  Labor  and Commerce  Standing                                                             
Committee  meeting   to  order   at  3:24   p.m.  Representatives                                                               
Sullivan-Leonard,  Stutes, Kito,  and Josephson  were present  at                                                               
the call to order.                                                                                                              
                                                                                                                                
          HB 329-REAL ESTATE APPRAISAL MNGMT. COMPANIES                                                                     
                                                                                                                                
3:26:14 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  announced that the  first order of business  would be                                                               
HOUSE  BILL NO.  329, "An  Act relating  to the  registration and                                                               
regulation  of   real  estate  appraisal   management  companies;                                                               
relating  to  the establishment  of  fees  by the  Department  of                                                               
Commerce, Community,  and Economic  Development; relating  to the                                                               
Board  of  Certified Real  Estate  Appraisers;  relating to  real                                                               
estate appraisers; and providing for an effective date."                                                                        
                                                                                                                                
3:26:35 PM                                                                                                                    
                                                                                                                                
THOMAS  ATKINSON, Staff,  Representative  Andy Josephson,  Alaska                                                               
State Legislature,  presented HB 329 on  behalf of Representative                                                               
Josephson, prime sponsor.  He explained  one of the causes of the                                                               
nationwide  recession  in 2008  was  bad  mortgages bundled  with                                                               
stocks.   He  stated one  of the  things that  was bad  about the                                                               
mortgages was  appraisals that were  wrong.  He indicated  it has                                                               
been reported that  this was due to  lending institutions leaning                                                               
on  appraisers, ending  up  with some  appraisals  that were  way                                                               
above  market value.     He explained  that Congress  devised the                                                               
DoddFrank  Wall Street  Reform and Consumer Protection  Act.  The                                                               
act inserted  another layer into  the mortgage  process, creating                                                               
an  arm's  length  mortgage  by  using  an  appraisal  management                                                               
company  (AMC).  The  federal legislation  set  up  an  appraisal                                                               
subcommittee which  promulgated federal regulations and  gave all                                                               
the  states  a  certain  amount  of time  to  set  up  their  own                                                               
regulations.   He underlined  the states are  not required  to do                                                               
so; however,  AMCs cannot  handle federally  related transactions                                                               
if  the   states  do  not.     He  explained   federally  related                                                               
transactions constitute about 10 percent  of the market. He added                                                               
AMCs want the  state to regulate them and the  appraiser want the                                                               
state to regulate AMCs.  He  said the process helps "Joe and Jane                                                               
Alaskan"  as  well.   He  remarked  that  getting a  mortgage  is                                                               
complex  and  it  happens  in  a hurry.    Typically,  a  lending                                                               
institution  doesn't hold  a  mortgage for  the  full period  but                                                               
turns  around  and  sells  it to  an  underwriter.  The  mortgage                                                               
originator does  not necessarily know whether  the transaction is                                                               
federally related.   He highlighted  the process only  relates to                                                               
residential property.   He stated HB 329 has a  companion bill in                                                               
the Senate.   He added there  is a federal deadline  on 10 August                                                               
2018, but there may be an extension.                                                                                            
                                                                                                                                
3:31:27 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  asked for  confirmation that  AMCs are  not currently                                                               
regulated by the state of Alaska.                                                                                               
                                                                                                                                
MR. ATKINSON answered in the affirmative.                                                                                       
                                                                                                                                
CHAIR  KITO asked  whether the  proposed bill  would be  adding a                                                               
prevision under the Real Estate Commission.                                                                                     
                                                                                                                                
MR.  ATKINSON answered  the  federal  regulations stipulate  that                                                               
when a  state regulates  AMCs, it  is done  through the  board of                                                               
certified real estate appraisers.                                                                                               
                                                                                                                                
3:32:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STUTES  said  she  thinks the  proposed  bill  is                                                               
trying to  solve a problem that  doesn't really exist.   She said                                                               
she does not see what the benefit is.                                                                                           
                                                                                                                                
MR.  ATKINSON answered  that Congress,  in the  wake of  the 2008                                                               
financial meltdown, thought  it would be a good idea  to add that                                                               
layer  so  that  the  lending   institutions  don't  contact  the                                                               
appraisers directly.  Using a  middleman avoids collusion between                                                               
appraiser and lender.                                                                                                           
                                                                                                                                
CHAIR  KITO explained  the proposed  bill would  be following  up                                                               
from a situation from ten years  ago.  He said Dodd-Frank was the                                                               
result  of what  happened with  the subprime  mortgage market  in                                                               
which the appraisers  were working in collusion  with real estate                                                               
agents or  banks to acknowledge  real estate values that  may not                                                               
have  been  accurate  because  there  was  not  an  arm's  length                                                               
relationship with the  appraisers.  He explained HB  329 would be                                                               
putting  the  structure  in  place   so  that  when  real  estate                                                               
management  companies  do  come  into the  state,  they  will  be                                                               
required to work through an AMC.                                                                                                
                                                                                                                                
3:35:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   STUTES  asked   how  many   other  states   have                                                               
implemented similar legislation.                                                                                                
                                                                                                                                
MR. ATKINSON shared  his understanding that 46  other states have                                                               
implemented something similar.                                                                                                  
                                                                                                                                
3:36:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD asked Mr.  Atkinson to review the                                                               
fiscal note  (FN).  She shared  her concern that the  state would                                                               
be adding a position specifically  to process the legislation and                                                               
to collect funds that would go to the federal government.                                                                       
                                                                                                                                
MR.  ATKINSON  answered  the  department   would  need  to  write                                                               
regulations  and  therefore  incur  some  costs.    He  said  the                                                               
legislature has asked departments to  pay for their own programs.                                                               
He indicated  DCCED is  particularly good  at covering  their own                                                               
programs  and has  board staff  that  would be  paid for  through                                                               
assessing fees.   He added  the federal government  requires that                                                               
some of the fees are put towards the appraisal subcommittee.                                                                    
                                                                                                                                
3:37:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD  asked  for examples  of  issues                                                               
occurring in Alaska.                                                                                                            
                                                                                                                                
MR. ATKINSON deferred to Mr. Derry.                                                                                             
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD asked  what a  private appraisal                                                               
business would have to pay annually to be covered.                                                                              
                                                                                                                                
MR.  ATKINSON   asked  whether   Representative  Sullivan-Leonard                                                               
referred to an AMC or an appraiser.                                                                                             
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD answered, "Both."                                                                               
                                                                                                                                
MR. ATKINSON said  he understood it costs $1,100  every two years                                                               
to  remain certified  with the  state.   He  said for  an AMC  it                                                               
depends on the state requirement for  a surety bond.  He surmised                                                               
with  the current  draft  of  the proposed  bill,  it would  cost                                                               
around $2,400  per year  to be certified  and have  a controlling                                                               
person who would be the single point of contact for the board.                                                                  
                                                                                                                                
3:40:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD  asked whether the  proposed bill                                                               
would mandate that a private appraiser  would have to be under an                                                               
appraisal company.                                                                                                              
                                                                                                                                
MR. ATKINSON  answered that it  would not. He added  the ultimate                                                               
responsibility  for certifying  the appraisal  is on  the lender.                                                               
He said they can  skip the AMC.  He mentioned  that Mr. Derry can                                                               
list at least three lenders in Alaska that do not use AMCs.                                                                     
                                                                                                                                
3:41:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE STUTES referenced a  letter [included in committee                                                               
packet] dated  February 12,  2019 [sic],  from Wells  Fargo which                                                               
reads, "If a state does not  set up a compliant regulatory system                                                               
for AMCs  by August of  2018, then  home loan lenders  cannot use                                                               
AMCs for  federally related  transactions."    She  asked whether                                                               
the proposed legislation is in response to a federal mandate.                                                                   
                                                                                                                                
MR.  ATKINSON answered  the mandate  from the  federal government                                                               
states that  if states want to  regulate AMCs, it has  to be done                                                               
by a  certain date  and regulations  must include  certain items,                                                               
but states  are not required to  regulate AMCs.  He  said if they                                                               
are  not regulated,  mortgages  will still  be  possible, but  it                                                               
might  be  more difficult,  and  AMCs  would  not make  money  on                                                               
certain transactions.                                                                                                           
                                                                                                                                
REPRESENTATIVE STUTES  shared her concern that  the proposed bill                                                               
would  be creating  a niche  for  another small  business at  the                                                               
expense of a  homeowner or an individual looking  for a mortgage.                                                               
She added  the appraiser would "jack  up his price" to  belong to                                                               
the organization that the state is not mandated to have.                                                                        
                                                                                                                                
MR. ATKINSON  answered the state  is not mandated by  the federal                                                               
government to regulate  AMCs.  He stated the costs  can be passed                                                               
on to the appraiser or  the lending institution and appraiser can                                                               
split the cost.  He said  the proposed bill would not mandate any                                                               
shared costs.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  STUTES  asked  what  the other  states  that  are                                                               
regulating AMCs charge.                                                                                                         
                                                                                                                                
MR. ATKINSON deferred to Mr. Derry.                                                                                             
                                                                                                                                
3:46:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON   suggested  if  the  state   does  not                                                               
regulate  AMCs, it  will not  fully  benefit from  the effort  to                                                               
insulate appraisals from lender/appraiser collusion.                                                                            
                                                                                                                                
MR. ATKINSON answered  that the Dodd-Frank Act  is about consumer                                                               
protection.                                                                                                                     
                                                                                                                                
3:46:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SULLIVAN-LEONARD   asked  whether  Representative                                                               
Josephson  knows of  any  instances  in Alaska  of  such a  thing                                                               
occurring.                                                                                                                      
                                                                                                                                
REPRESENTATIVE JOSEPHSON said  he does not but that  there is the                                                               
issue of federally related transactions as well.                                                                                
                                                                                                                                
MR.   ATKINSON   added   that  the   term,   "federally   related                                                               
transactions" is a quagmire.   He said it's a complex environment                                                               
and Alaska Housing Finance Corporation  (AHFC) would seem to be a                                                               
federally related  transaction, but he  said he can't  state with                                                               
any certainty that  it is.  He remarked there  is a definition of                                                               
federally  related   transactions  on  BASIS,  but   it  is  very                                                               
difficult to understand.                                                                                                        
                                                                                                                                
3:48:23 PM                                                                                                                    
                                                                                                                                
DAVID DERRY,  Chair, Board of  Certified Real  Estate Appraisers,                                                               
testified in  support of HB  329.   He stated the  board supports                                                               
the AMC legislation and oversight  proposal.  He added that while                                                               
the  board  is  not  looking  for  more  work,  oversight  is  an                                                               
important function  that should  happen in Alaska.  He reiterated                                                               
some lenders use AMCs and some do  not.   He said the easiest way                                                               
to describe  an AMC is  as an entity  used to find  appraisers in                                                               
the process of a mortgage transaction.   He explained this is for                                                               
people  who  are looking  for  mortgages.   He  mentioned  Rocket                                                               
Mortgage in  the Lower 48.   He  added there are  no Alaska-based                                                               
AMCs.   He  said  if someone  applies for  a  loan in  Anchorage,                                                               
Alaska, or Fairbanks, Alaska, using  an AMC is an expeditious way                                                               
to  comply  with  the  requirement that  there  be  a  separation                                                               
between the  entity making the  loan and the appraiser.  He added                                                               
one of  the impetus to pass  this legislation is to  provide that                                                               
separation between loan officer and  appraiser. He said he didn't                                                               
know of any cases brought to the board.                                                                                         
                                                                                                                                
MR.  DERRY said  appraisers in  Alaska  are paid  $1,050 and  $80                                                               
dollars is paid to the  federal appraisal subcommittee.  He added                                                               
there would also  be a fee for management companies  which is $25                                                               
per appraiser.  He said one of  the criteria is that  the AMC has                                                               
15  appraisers in  1  state or  a  total of  25  appraisers in  2                                                               
states. He  spoke to fees  and costs to  the consumer and  to the                                                               
state.   He said there  should not be  any cost to  the consumer.                                                               
He said  some lenders use  AMCs (Wells Fargo, Alaska  USA Federal                                                               
Credit Union)  and some  do not (First  National Bank  of Alaska,                                                               
Northrim Bank,  Mount McKinley Bank).   He specified  the lenders                                                               
can  set up  within  the  bank how  to  operate under  Dodd-Frank                                                               
[Act].                                                                                                                          
                                                                                                                                
3:56:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STUTES mentioned  the  appraiser's  license is  a                                                               
rigorous process.  She asked  whether the board would take action                                                               
against an appraiser who was seen to be colluding.                                                                              
                                                                                                                                
MR. DERRY  answered the board  would take action against  the AMC                                                               
and  the appraiser  or,  where there  is no  AMC,  it would  take                                                               
action against  the appraiser.  He  said he agrees that  it is an                                                               
onerous  process  to get  licensed.    He underlined  the  Alaska                                                               
requirements for certification mirror those  of other states.  He                                                               
said there is  a nationwide effort to make it  somewhat easier to                                                               
become certified  as a residential  appraiser.  He stated  it was                                                               
the  result of  a change  in federal  regulations established  in                                                               
early March 2018.                                                                                                               
                                                                                                                                
REPRESENTATIVE STUTES suggested having  an AMC would not preclude                                                               
the occurrence of collusion.                                                                                                    
                                                                                                                                
MR. DERRY answered the proposed bill  would allow the board to go                                                               
after  the AMC.   He  explained that  without legislation,  there                                                               
would be no oversight at all.                                                                                                   
                                                                                                                                
REPRESENTATIVE STUTES said  she cannot believe that  the AMC will                                                               
"eat that cost" and not pass it on to the consumer.                                                                             
                                                                                                                                
MR.  DERRY reminded  that the  lender  is the  originator of  the                                                               
loan.   He stated most of  the AMCs are fairly large entities and                                                               
$2,400 is not a big cost.                                                                                                       
                                                                                                                                
4:02:54 PM                                                                                                                    
                                                                                                                                
MARK  SCHIFFMAN,   Executive  Director,  Real   Estate  Valuation                                                               
Advocacy  Association (REVAA),  testified  in the  hearing on  HB                                                               
329.   He  said  AMCs  support being  regulated  in  Alaska.   He                                                               
clarified 46 states  have passed similar legislation.   He listed                                                               
Alaska, New York,  Massachusetts, and Ohio as the  final four and                                                               
informed there is legislation being  proposed in all four states.                                                               
He asked  on behalf of  the AMCs to be  regulated in Alaska.   He                                                               
added it is a self-paid regulation  and there would be no cost to                                                               
the state.   He said AMCs  are already working in  the state, and                                                               
the difference  would be there  would be a revenue  generator. He                                                               
said the  primary role of  an AMC  is public safety  and consumer                                                               
protection.   He    indicated   the    lender   has    the   same                                                               
responsibilities.     He   added  most   American  lenders   have                                                               
outsourced appraisal services to AMCs.                                                                                          
                                                                                                                                
4:06:20 PM                                                                                                                    
                                                                                                                                
CHAIR KITO opened public testimony  on HB 329.  Upon ascertaining                                                               
that  no  one   was  available  to  testify,   he  closed  public                                                               
testimony.                                                                                                                      
                                                                                                                                
CHAIR KITO held over HB 329.                                                                                                    
                                                                                                                                
         HB 374-ON-BILL FINANCING OF ENERGY IMPROVEMENTS                                                                    
                                                                                                                                
4:06:46 PM                                                                                                                    
                                                                                                                                
CHAIR KITO  announced that the  final order of business  would be                                                               
HOUSE BILL NO.  374, "An Act relating to on-bill  financing by an                                                               
electric  or   gas  distribution   utility  for   certain  energy                                                               
efficiency and conservation improvements."                                                                                      
                                                                                                                                
4:07:06 PM                                                                                                                    
                                                                                                                                
ROB  EARL,   Staff,  Representative   Adam  Wool,   Alaska  State                                                               
Legislature, presented  HB 374 on behalf  of Representative Wool,                                                               
prime sponsor.   He paraphrased  the sponsor  statement [included                                                               
in   committee  packet],   which  reads   as  follows   [original                                                               
punctuation provided]:                                                                                                          
                                                                                                                                
     HB 374 would  allow a utility to  voluntarily create an                                                                    
     on-bill financing or on-bill  repayment program to help                                                                    
     customers finance energy  improvements. The improvement                                                                    
     must utilize  renewable energy or include  switching to                                                                    
     a more efficient device or  fuel that does not increase                                                                    
     greenhouse  gas  emissions.  This legislation  will  be                                                                    
     particularly  useful  as  the Interior  Energy  Project                                                                    
     expands  its  reach and  a  large  number of  Fairbanks                                                                    
     residents choose to convert from  oil to natural gas to                                                                    
     heat their homes.                                                                                                          
                                                                                                                                
     The   on-bill  financing   program  allows   a  utility                                                                    
     customer to borrow money for  an energy improvement and                                                                    
     then repay it through  a "meter conservation charge" on                                                                    
     their  utility bill.  A customer's  utility bill,  even                                                                    
     with   the   meter   conservation  charge,   is   often                                                                    
     immediately lower  due to savings  in energy  costs due                                                                    
     to increased efficiency.                                                                                                   
                                                                                                                                
     Examples  of  energy  improvements that  would  qualify                                                                    
     under HB 374  include: adding solar panels  to a house;                                                                    
     converting  to  a  cleaner   burning  wood  stove;  and                                                                    
     converting  a   boiler  or  furnace  to   natural  gas.                                                                    
     Weatherization  projects such  as upgrading  windows or                                                                    
     insulation would not quality under this legislation.                                                                       
                                                                                                                                
     HB 374 allows for utilities to create either an "on-                                                                       
     bill  financing"  or  an "on-bill  repayment"  program.                                                                    
     Under the former type of  program, the utility provides                                                                    
     the capital for the loan  to the customer and under the                                                                    
     latter  a  third   party  financial  institution  would                                                                    
     provide the capital.                                                                                                       
                                                                                                                                
     A  utility may  recoup  all of  their costs  associated                                                                    
     with the program  through a line item on the  bill of a                                                                    
     customer who has elected to  utilize the program for an                                                                    
     energy improvement. The balance of  the costs on an on-                                                                    
     bill  financing  agreement  may  be  recovered  by  the                                                                    
     utility when a property is sold.                                                                                           
                                                                                                                                
     HB  374 provides  an optional  tool  for utilities  and                                                                    
     their customers  to lower energy costs  and improve air                                                                    
     quality in Alaska.                                                                                                         
                                                                                                                                
4:10:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD asked  how the transactions would                                                               
work if she decided to put a wind turbine on her property.                                                                      
                                                                                                                                
MR. EARL answered the electrical  company would have to implement                                                               
the  program.   He suggested  it may  engage a  bank and  if wind                                                               
turbine  was included  in  the  options for  things  that can  be                                                               
financed,  the  utility  would  act  as  "pass-through"  for  the                                                               
repayment.  He said there  would probably be an additional charge                                                               
on  the  utility bill  to  repay  the  costs.  He said  it's  not                                                               
specified  in the  bill what  the rate  of interest  on repayment                                                               
would be.                                                                                                                       
                                                                                                                                
REPRESENTATIVE SULLIVAN-LEONARD surmised the  whole premise is to                                                               
lower  electricity costs.   She  asked how  the bill  would lower                                                               
costs.                                                                                                                          
                                                                                                                                
MR. EARL  explained the lending  institution has  extra assurance                                                               
that if  the loan is behind,  the utility will shut  off power to                                                               
the customer.   He gave the example of a  $5,000 improvement with                                                               
a 10-year  loan, at 3  percent the  payment added to  the monthly                                                               
bill would be around  $48.  He said once the  charge is paid off,                                                               
the total  bill would  almost certainly be  lower going  into the                                                               
future.                                                                                                                         
                                                                                                                                
4:14:02 PM                                                                                                                    
                                                                                                                                
GENE  THERRIAULT,   Alaska  Industrial  Development   and  Export                                                               
Authority (AIDEA);  Interior Energy  Project (IEP),  testified in                                                               
the hearing  on HB  374.    He said  Alaska Energy  Authority and                                                               
AIDEA had  worked together with  Interior communities for  a more                                                               
affordable, cleaner  source of  fuel.   He informed  the Property                                                               
Assessed  Clean Energy  Act (PACE)  legislation put  in place  to                                                               
target businesses  and the on-bill  mechanism of HB 374  has many                                                               
of the  same attributes  of the PACE  legislation.   He explained                                                               
the monthly  bill would be  used as a  means to recapture  a loan                                                               
payment for converting  property to natural gas  or solar panels.                                                               
He  said that  by attaching  or  borrowing the  strength of  that                                                               
relationship, it  could lower rates  of default.  He  added lower                                                               
default leads to lower interest rates.                                                                                          
                                                                                                                                
MR. THERRIAULT  referred to a  working group  that was set  up in                                                               
the  Interior to  examine ways  of incenting  customers to  avail                                                               
themselves of the mechanisms for transferring to natural gas.                                                                   
He said the participants were asked  to bring in recent bills and                                                               
then answer  questions.  He stated  he was surprised that  an on-                                                               
bill repayment mechanism  was more popular than  a lower interest                                                               
rate for a  loan.  He said the ability  to finance an improvement                                                               
on their  property and enjoy  the benefit of the  improvement and                                                               
pass on  the obligation attached to  the meter to the  next owner                                                               
was popular.                                                                                                                    
                                                                                                                                
MR. THERRIAULT  spoke to research  done with the  Rural Utilities                                                               
Service  (RUS)  program  at  the   United  States  Department  of                                                               
Agriculture  (USDA)   for  federal   funds  that   could  provide                                                               
financing to  the consumer.   He  said he  was surprised  to find                                                               
that  on-bill financing  was  proposed  as a  way  to ensure  low                                                               
default  rates associated  with  the  lending.   He  said if  the                                                               
federal program  was to offer  low interest money, it  would want                                                               
to ensure it is involved in low risk lending.                                                                                   
                                                                                                                                
MR.  THERRIAULT  said a  lot  of  arrangements made  between  the                                                               
parties  would  be put  down  in  contracts  to ensure  that  the                                                               
utility passes on  the repayment to the lending  institution.  He                                                               
stated that on  behalf of AIDEA and IEP, it  is an important tool                                                               
for utilities.   He  spoke to further  research on  other states'                                                               
approach to on-bill financing and  on state statutes to determine                                                               
if  legislation is  absolutely necessary.    He indicated  Alaska                                                               
state statute is silent on the  issue.  He said the proposed bill                                                               
would clarify  in state law  that on-bill financing  is available                                                               
on a voluntary basis.                                                                                                           
                                                                                                                                
4:22:06 PM                                                                                                                    
                                                                                                                                
JOMO STEWART,  General Manager,  Interior Gas  Utility, testified                                                               
in  support  of  HB  374.     He  thanked  the  sponsor  for  the                                                               
legislation.                                                                                                                    
                                                                                                                                
4:22:43 PM                                                                                                                    
                                                                                                                                
ALEC  MESDAG, Director,  Energy Services,  Alaska Electric  Light                                                               
and Power (AEL&P), testified in support  of HB 374.  He explained                                                               
this  bill  will  provide a  valuable  tool,  particularly  among                                                               
consumers that  have limited options.   He surmised  the proposed                                                               
bill wouldn't create an initial  decrease in bills but that there                                                               
is still a lot of value in it.   He suggested there is a tendency                                                               
to  underestimate  comfort  as  a defining  factor.    He  stated                                                               
updating windows may  not directly decrease bills,  but the added                                                               
comfort would impact  how high the heat is kept.  He mentioned it                                                               
would be  important to  review how fuel  switching is  defined in                                                               
the proposed  bill.   He suggested  it may  be useful  to include                                                               
some  language  to  grant discretion  to  utilities  to  preclude                                                               
certain measures that could be a detriment to the system.                                                                       
                                                                                                                                
4:27:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked how the sponsor  would know about                                                               
what AEL&P would accept as a conservation measure.                                                                              
                                                                                                                                
MR. MESDAG  said his  concerns were  very system-specific,  so it                                                               
would need to be a general allowance.                                                                                           
                                                                                                                                
4:28:16 PM                                                                                                                    
                                                                                                                                
CHAIR KITO opened public testimony on HB 374.                                                                                   
                                                                                                                                
4:28:35 PM                                                                                                                    
                                                                                                                                
STUART COHEN,  Interfaith Power and  Light, testified  in support                                                               
of HB 374.  He said  Interfaith Power and Light was attempting to                                                               
implement a  program that replaces  inefficient oil  and electric                                                               
heating systems with air source heat  pumps.  He explained a heat                                                               
pump is like  an air conditioner and can reduce  heating bills by                                                               
40  percent to  70 percent.   He  said it  costs about  $4,100 to                                                               
install. He said  they are used in China because  the systems are                                                               
cheap.    He spoke  to  modelling  in  Juneau, Alaska,  on  8,901                                                               
private buildings.   He said  if Juneau, Alaska, were  to convert                                                               
all  8,901  buildings in  the  model,  the energy  savings  would                                                               
amount to  nearly $10 million  a year.   He said the  company who                                                               
carried  out the  modelling  said that  quick  finance system  is                                                               
crucial.  He said  that for those with a low  income, it could be                                                               
hard to  come up with  the money for  a heat  pump.  He  said the                                                               
proposed bill,  by enabling third  party financing,  would reduce                                                               
the risk for both borrower and lender.                                                                                          
                                                                                                                                
4:32:47 PM                                                                                                                    
                                                                                                                                
CEAL SMITH,  Alaska Climate Action Network,  testified in support                                                               
of HB 374.  She stated her  organization is very happy to see the                                                               
proposed bill.   She mentioned the language in  the proposed bill                                                               
is not clear regarding weatherization.                                                                                          
                                                                                                                                
4:35:43 PM                                                                                                                    
                                                                                                                                
CORY BORGESON, CEO, Golden Valley  Electric, testified in support                                                               
of HB 374.   He stated his is a  not-for-profit electric utility.                                                               
He  said he  thinks  the proposed  bill is  "fairly  broad."   He                                                               
indicated he was not certain  that Golden Valley "would jump into                                                               
this," but that there are  opportunities to provide financing for                                                               
its consumers to move into renewable energy products.                                                                           
                                                                                                                                
4:37:45 PM                                                                                                                    
                                                                                                                                
CHAIR KITO held over HB 374.                                                                                                    
                                                                                                                                
4:38:46 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Labor and  Commerce Standing Committee  meeting was  adjourned at                                                               
4:38 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB329 Fiscal Note DCCED CBPL 3.2.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Letters of Support 2.24.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Sectional Analysis 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Sponsor Statement 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - staggered effective date graphic 3.15.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - Wells Fargo 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 ver O 2.23.18.PDF HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Document-Federally-Related Transactions defined 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Document-REVAA's Answers to Sponsor's Questions 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Documents-Leg Research, other states' bonds 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Additional Document-Appraisal Bd Chair's Response to Sponsor's Questions 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - REVAA 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Letters of Support 2.24.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Sectional Analysis 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - Wells Fargo 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB329 Supporting Document - staggered effective date graphic 3.15.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 329
HB374 Sponsor Statement 2.28.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Sectional Analysis - Version N 3.8.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Supporting Document - DOE Summary of On-Bill Financing 2.27.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB 374 Version U 2.28.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 ver J.PDF HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Explanation of Changes from Version J to Version N.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Fiscal Note DCCED-RCA 2.23.18.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 Letters of Support.pdf HL&C 3/16/2018 3:15:00 PM
HB 374
HB374 version N.PDF HL&C 3/16/2018 3:15:00 PM
HB 374