Legislature(2017 - 2018)BELTZ 105 (TSBldg)
04/17/2018 03:30 PM Senate COMMUNITY & REGIONAL AFFAIRS
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| Audio | Topic |
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| Start | |
| HB374 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 374 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
April 17, 2018
3:54 p.m.
MEMBERS PRESENT
Senator Click Bishop, Chair
Senator Lyman Hoffman
Senator Bert Stedman
MEMBERS ABSENT
Senator Anna MacKinnon
Senator Berta Gardner
COMMITTEE CALENDAR
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 374(L&C)
"An Act relating to on-bill financing by a utility for certain
energy efficiency and conservation improvements."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 374
SHORT TITLE: ON-BILL FINANCING OF ENERGY IMPROVEMENTS
SPONSOR(s): REPRESENTATIVE(s) WOOL
02/21/18 (H) READ THE FIRST TIME - REFERRALS
02/21/18 (H) ENE, L&C
03/01/18 (H) ENE AT 10:15 AM CAPITOL 17
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
03/16/18 (H) Heard & Held
03/16/18 (H) MINUTE(L&C)
03/26/18 (H) L&C AT 3:15 PM BARNES 124
03/26/18 (H) Heard & Held
03/26/18 (H) MINUTE(L&C)
03/31/18 (H) L&C AT 1:00 PM BARNES 124
03/31/18 (H) Moved CSHB 374(L&C) Out of Committee
03/31/18 (H) MINUTE(L&C)
04/02/18 (H) L&C RPT CS(L&C) NT 4DP
04/02/18 (H) DP: WOOL, JOSEPHSON, EDGMON, KITO
04/09/18 (H) TRANSMITTED TO (S)
04/09/18 (H) VERSION: CSHB 374(L&C)
04/10/18 (S) READ THE FIRST TIME - REFERRALS
04/10/18 (S) CRA
04/11/18 (S) CRA WAIVED PUBLIC HEARING NOTICE,RULE
23
04/12/18 (S) CRA AT 3:30 PM BELTZ 105 (TSBldg)
04/12/18 (S) -- MEETING CANCELED --
WITNESS REGISTER
REPRESENTATIVE WOOL
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 374.
ROB EARL, staff to Representative Wool
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided a sectional analysis for HB 374.
STUART COHEN
Alaska Interfaith Power and Light
Juneau, Alaska
POSITION STATEMENT: Supported HB 374.
CAROLINE F. MALSEED, Priest
Saint Brendan's Episcopal Church
Juneau, Alaska
POSITION STATEMENT: Supported HB 374.
GENE THERRIAULT
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Supported HB 374.
DUFF MITCHELL, Managing Director
Juneau District Heating Hydropower, Inc.
Juneau, Alaska
POSITION STATEMENT: Supported HB 374.
ACTION NARRATIVE
3:54:23 PM
CHAIR CLICK BISHOP called the Senate Community and Regional
Affairs Standing Committee meeting to order at 3:54 p.m. Present
at the call to order were Senators Stedman, Hoffman, and Chair
Bishop.
HB 374-ON-BILL FINANCING OF ENERGY IMPROVEMENTS
3:54:41 PM
CHAIR BISHOP announced consideration of HB 374. [CSHB 374(L&C),
version 30-LS1333\E, was before the committee.]
REPRESENTATIVE WOOL, sponsor of HB 374, Alaska State
Legislature, Juneau, Alaska, said HB 374 is similar to the
Commercial Property Assessed Clean Energy Act (C-PACE)
legislation adopted last year to help finance commercial
property energy efficiency. HB 374 is primarily for residential
properties. It would allow a utility to voluntarily create an
on-bill financing program to help customers finance energy
improvements. The on-bill financing program would allow a
utility customer to borrow money for an energy improvement and
then repay it through their utility bill.
He explained that the utility could finance the program itself
or borrow the money from a bank at no cost to the state. It
could cover the cost of the program by charging a slightly
higher interest rate on the loans to customers than it is paying
to the bank. The improvement must utilize renewable energy or
include switching to a more efficient device or a fuel that does
not increase green house gas emissions.
REPRESENTATIVE WOOL said HB 374 will be particularly useful as
the Interior Energy Project in Fairbanks expands its reach and a
large number of Fairbanks residents choose to convert from oil
to natural gas. A lot of people were surveyed and want to
convert but it costs too much to do all at once.
Examples of energy improvements could be adding solar panels, a
new water heater, converting from oil to gas, or using district
heat or steam. An individual utility can choose which types of
improvements they want to use and can also choose not to do a
program if they don't want to. It's entirely voluntary.
REPRESENTATIVE WOOL added that HB 374 provides an optional tool
for utilities and their customers to lower energy costs and
increase air quality, especially in Fairbanks.
3:57:44 PM
ROB EARL, staff to Representative Wool, Alaska State
Legislature, Juneau, Alaska, provided a sectional analysis for
HB 374 as follows:
Sec. 42.05.750 On-bill financing of energy efficiency
improvements: authorization and eligibility.
(a) Allows a utility to enter into an on-bill
financing agreement with a customer to finance energy
conservation systems. The agreement provides for the
utility to cover costs through a meter conservation
charge on the customer's utility bill.
(b) Building must be occupied and not under initial
construction to be eligible.
(c) The interest rate on the loan to finance the
energy improvement must be fixed.
(d) Balance of loan may be paid in full without
penalty at any time.
(e) Nothing in this section requires a utility to
enter into an agreement with a specific customer or
for a specific devise or system.
Sec. 42.05.751 Meter conservation charge.
(a) A meter conservation charge may be used to recover
actual costs, including administrative costs, and
repayment of costs performed by a third party.
(b) To recover costs under an on-bill financing
agreement, a utility may assess a meter conservation
charge on the customer who initially entered into the
on-bill financing agreement; or a subsequent purchaser
of the property.
(c) A meter conservation charge must be shown as a
separate item on a customer's bill.
(d) A utility may treat failure to pay a meter
conservation charge the same as failure to pay the
utility or gas account and may disconnect service in
response to non-payment. A utility may not remove an
energy improvement system in response to non-payment.
(e) Money collected by a utility as a meter
conservation charge may not be taxed as revenue.
(f) The billing and collection of a meter conservation
charge does not subject a utility to the laws that
regulate financial institutions.
Sec. 42.05.752 Notice of on-bill financing agreement
and meter conservation charge.
(a) A utility that enters into an on-bill financing
agreement must file notice of the agreement, intended
to give a subsequent purchaser notice that the
building is subject to a meter conservation charge.
(b) A utility must file notice when an on-bill
financing agreement is paid in full.
Sec. 42.05.753 Transferability of on-bill financing
balances to subsequent purchasers. A utility that
enters into an on-bill financing agreement may recover
costs from a subsequent purchaser.
Sec. 42.05.754 Rental Property.
(a) A utility may recover costs under an on-bill
financing agreement by accessing a meter conservation
charge for a rental property only if the landlord is
responsible for the entire utility bill, including the
meter conservation charge.
Sec. 42.05.755 Third parties; contracting and
liability.
(a) A utility may contract with a third party for
financing the costs of an energy conservation system.
(b) If a third party installs, operates or maintains
the energy conservation system, the utility is not
liable for these functions and may not provide a
warranty of fitness on the system.
(c) When a utility contracts with a third party to
perform administrative or financing functions: (1) &
(2) The third party is not liable for the energy
conservation system and may not provide a warranty of
fitness on the system.
(d) The provisions in (b) and (c) above may not be
construed to impair the rights of a utility customer
against any parties involved in the purchase or
installation of an energy conservation system.
Sec. 42.05.756. Definitions.
(1) "energy conservation system" includes a fuel-
switching system that does not increase greenhouse gas
emissions and is either more efficient or results in
lower fuel expenses.
(2) "meter conservation charge" means a charge placed
on a customer's utility bill by which the utility
recovers all costs related to the utility having
entered into an on-bill financing agreement with the
customer.
(3) "on-bill financing agreement" means an agreement
entered into under AS 42.05.750.
4:00:59 PM
SENATOR BISHOP asked him to expand on the language "the building
must be occupied and not under initial construction to be
eligible" under AS 42.05.750.
MR. EARL answered basically any building that is not under
initial construction is eligible; it could be a church, a non-
profit, or a private residence.
CHAIR BISHOP asked what if the building is an owner-build
residence and the floor isn't down yet, but that is when it is
easiest to put the boiler in. Would they want those people to be
eligible for a loan?
MR. EARL replied that this measure is designed more for energy
conversions. Initial installation of a system wouldn't be
eligible.
CHAIR BISHOP referenced AS 42.05.755 third parties and asked
Senator Hoffman if Bethel has regulated utilities.
SENATOR HOFFMAN replied they are city-owned. He asked the
sponsor where a utility gets its money to lend.
4:04:19 PM
MR. EARL answered under this bill a utility could use its own
money but more likely they would get it from a financial
institution or possibly a municipality. For example, if someone
in Fairbanks wants to install solar panels on their home: in
order for that to be possible, Golden Valley Electric would have
had to start an on-bill financing agreement. Secondly, they
would have had to include solar panels as an eligible project.
Then the individual could enter into this agreement and borrow
$5,000 for 10 years from the utility. The utility would most
likely borrow a lump sum from a local financial institution, say
$3 million, and then they would charge a slightly higher
interest rate to the customer than they were charged by the bank
in order to pay for the program. A $5000 improvement for 10
years would add about $48 a month to a customer's utility bill.
SENATOR HOFFMAN said the net result would be a lower cost to the
customer but in the long run the utility would earn less money.
If that's the case, what incentive does the utility have to do
this?
MR. EARL replied for one thing, if the utility is close to
having to build another generation plant, this could obviate
that need. It could also lead to lower rates for customers.
SENATOR HOFFMAN said he could see that happening in a
cooperative, but not for a municipal or private utility.
REPRESENTATIVE WOOL added that rural utilities especially have a
certain fixed cost and if they are selling less electricity they
would basically have to sell it for more to recover those fixed
costs. A cooperative doesn't have the same profit incentive and
may want to lower the rate. If a rural utility found this
program was financially disadvantageous, they would choose not
to do it. However, there may be a generation problem or peak
load issues. So, they may want people to produce power during
certain times of the day; this financing could be used for a
storage device if someone wants to produce electricity and store
it and use it during peak hours. It may not be for every
utility, and especially a smaller rural utility. It's totally
voluntary.
4:07:42 PM
CHAIR BISHOP finding nor further questions, opened public
testimony.
STUART COHEN, Alaska Interfaith Power and Light, Juneau, Alaska,
supported HB 374. He said one of the tasks they have undertaken
is to implement a program that replaces inefficient electric and
oil heating systems with air source heat pumps. They are trying
to bring more customers to the electric company.
A heat pump is sort of like an air conditioner that can also
heat. It is two-thirds times more efficient than electric
baseboard or oil heat. They are so efficient that they reduce
people's heating bills by 40-70 percent and they generate enough
savings to pay for themselves in 4-6 years. The technology is
ideal for Southeast Alaska, the Southcentral Coast, and the
Aleutians. It would cost $4100 to install a simple model in a
1500 square foot Juneau home.
MR. COHEN said their team modeled the potential impact of heat
pumps on Juneau's economy and modeled 8,900 residential
structures out of a total of 10,236 private buildings and based
the model on conversations with local heating contractors, home
owners, and a group called Efficiency Main, a state agency that
helps its citizens save money through energy efficiency. They
found that if Juneau converted all 8900 homes, mobile homes, and
condos the energy savings would be nearly $10 million year.
Adding apartments and commercial and government buildings would
save another $20-30 million. The same model applies to Sitka
that has an underutilized hydro project, Ketchikan, Kodiak, and
many other communities. Incidentally, since Juneau and the
communities he named are powered by hydro electric or wind
energy, it also zeros out a large part of their carbon
footprint.
His research revealed that a reliable secure financing system is
critical. That is what this bill addresses. If you have a low
income, it's hard to come up with $4000 in savings to install a
heat pump. Likewise, for a church or business with limited funds
that is not sure how long they will be in a building. "This
wonderful bill addresses that."
Enabling third-party financing and putting it on the utility
bill and making it transferable reduces the risk for both the
borrower and the lender. The program is flexible enough to help
people all over the state. He concluded saying it costs nothing,
it compels nothing, and it constricts nothing. It empowers
Alaskans to make practical money-saving improvements to their
homes, their businesses, or their church as they see fit.
4:11:54 PM
CAROLINE F. MALSEED, Priest, Saint Brendan's Episcopal Church,
Juneau, Alaska, supported HB 374. She is also a member of Alaska
Interfaith Power and Light. She is on the standing committee of
the diocese and works with people throughout the diocese and is
aware of issues that face other communities as well as Juneau.
MS. MALSEED said she supports this bill for two reasons. The
first is that Alaska is a very expensive place to live. A number
of people in her community have left Alaska in the last few
years because they can't afford to stay here. The option in HB
374 might make Alaska a little bit more affordable for some
folks who don't want to leave.
The other point she wanted to make is that religious
congregations around the state tend to be small; hers has 70
people. It is one of the largest episcopal churches in the
state. Most congregations tend to have really old buildings. In
her denomination the cost of heat makes up the majority of the
budget. Many churches don't have clergy on site for that reason.
MS. MALSEED said the religious congregations provide a lot of
services to their communities such as meeting spaces, social
assistance and emotional support, and not for just their people
but all the people in their communities. This bill would free up
some of the denominational budgets to offer more services to the
communities, to enable the congregations to care better for
their buildings and to avoid replacement, to improve the quality
of life of being in that building.
CHAIR BISHOP thanked her for her comments and said she is 100
percent accurate. He mentioned that last week the President of
the United States signed an executive order asking faith-based
organizations to do more for underprivileged people.
4:14:50 PM
GENE THERRIAULT, Alaska Industrial Development and Export
Authority (AIDEA), Anchorage, Alaska, supported HB 374. He had
been tracking potential federal sources of funding through the
U.S. Department of Agriculture's (USDA) Rural Utility Services
Office and found the funds he was tracking had been
reauthorized. One of them is the Rural Energy Savings Program;
the regulations cover a repayment mechanism through charges
added to an electric bill for the property. It is an appropriate
risk mitigation feature for the lending. The State of South
Carolina was one of the first states to qualify for a
competitive grant through that program and the legislation
before them was patterned after it.
Another source of funding is the Energy Efficiency and
Conservation Loan Program that is also offered by USDA. One of
the things that is hard-wired into the regulations for that
particular loan program is fuel switching. And that is one of
the things this bill incorporates. Switching from fuel oil to
natural gas in Fairbanks is specifically mentioned or electric
heat to a ground source heat pump, which is switching to a
source of energy that has a lower emission, one of the things a
federal source of money is looking for.
4:17:22 PM
The USDA has a couple of new programs: the High Energy Cost
Grant Program is one. It specifically talks about renewable
energy and expanding assistance for use of natural gas. HB 374
specifically lists Alaska Native Corporations and cooperatives
as eligible entities.
Finally, an electric infrastructure loan and loan guarantee
program is another source of federal funds for the energy
systems themselves to expand the reach of their systems.
Depending on how the program that gets put together, both the
PACE legislation and this legislation allows for utilities to
put mechanisms in place that are very attractive and will
actually help their applications score well as they apply for
federal funds.
4:18:39 PM
SENATOR STEDMAN said it looks like this bill is targeted to
incentivize Fairbanks to build out to natural gas, which he
doesn't oppose.
MR. THERRIAULT responded that the conversion rate is a concern,
and as the price of oil has come down the delta between the
delivered price of natural gas and fuel oil has gotten smaller.
and right now the price of natural gas per BTU is lower than
fuel oil. But a complete home conversion could cost $10,000 to
$12,000, and the ability to stretch that out over a long period
of time and perhaps access low interest capital, and have the
obligation transfer if you sell your home are all things that
will help incent people to decide to use this tool not just in
Fairbanks, but across the state.
CHAIR BISHOP remarked if Alaska gets a gas line, it has five
take-off points for expansion of gas along the route.
MR. THERRIAULT said Senator Hoffman asked about whether the
utility would utilize this option if it actually ended up in
lowering sales of electricity, and having worked at AEA, he
knows some communities are blessed with a hydro source, but as
the community expands, they get to the point where hooking up a
couple more houses necessitates firing up the diesel plant. But
the cost of running that diesel plant doesn't flow just to the
last customer who hooked up, it gets spread across the whole
community. So, using a tool like this enables a community to
save by spreading the hydro energy to more customers.
SENATOR STEDMAN said in his region, he has noticed conversions
from oil, which decreases oil consumption, which in turn
increases the oil price. It's quite the ongoing discussion at
City Hall and around the larger commercial buildings around town
when they talk about electrical conversion of their boilers and
the impact it has on other fuel users.
4:22:40 PM
DUFF MITCHELL, Managing Director, Juneau District Heating
Hydropower, Inc., Juneau, Alaska, supported HB 374. One point
that hasn't been brought up is that the State of Alaska's 2010
energy policy says the state's energy should be 50 percent
renewable by 2025 on a 15-percent energy efficiency per capita
basis from 2010 to 2020. This bill doesn't cost the state
anything and it helps multiple regions. He said a lot of people
would like to have energy efficiency and save money; they would
like to take that extra $50 month and spend it on food or
basketball camp, but they can't come up with that first $5,000
to do that energy efficiency.
SENATOR STEDMAN added that so many homes in Sitka converted to
heat pumps that it also dropped their electric consumption. So,
as the city incentivized heat pumps, the utility lost sales.
MR. MITCHELL responded that economies are not easy and market
forces work, claiming there will always be losers and winners.
The Sitka utility should have been targeting the oil-fired Toyo
stoves and boilers and moving those to air source heat pumps and
then they would have grown the pie instead of making the pie
more efficient. He said in Juneau he has seen 5 percent growth
of electric in the last year even though it has had normal
heating degree days. It has seen an "explosion" of air source
heat pumps, electric vehicles, and marijuana growing operations.
CHAIR BISHOP thanked him, and finding no further comments,
closed public testimony and held HB 374 in committee.
4:27:41 PM
CHAIR BISHOP adjourned the Senate Community and Regional Affairs
meeting at 4:30 p.m.
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