Legislature(2007 - 2008)SENATE FINANCE 532
07/25/2008 11:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB4005 | |
| SB4006 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB4005 | TELECONFERENCED | |
| *+ | SB4006 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
July 25, 2008
11:45 a.m.
CALL TO ORDER
Co-Chair Hoffman called the Senate Finance Committee meeting
to order at 11:45:33 AM.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Senator Fred Dyson
MEMBERS ABSENT
Senator Bert Stedman, Co-Chair
ALSO PRESENT
Jay Livey, Staff, Senator Hoffman; Ron Kreher, Chief of
Field Operations, Division of Public Assistance, Department
of Health and Social Services; David Teal, Director,
Legislative Finance Division; Senator Gene Therriault
PRESENT VIA TELECONFERENCE
Sarah Fisher-Goad, Deputy Director of Operations, Alaska
Energy Authority, Department of Commerce, Community and
Economic Development
SUMMARY
SB 4005 "An Act authorizing, as a temporary rebate of
state resources to certain state residents,
payments to assist in meeting heating costs under
the federal and state heating assistance programs;
and providing for an effective date."
SB 4005 was heard and HELD in Committee for
further consideration.
SB 4006 "An Act amending the power cost equalization
program, repealing the exclusion from eligibility
for power cost equalization for certain power
projects that take their power from hydroelectric
facilities, and amending the definition of
'eligible electric utility' as it applies to the
power cost equalization program and the grant
program for small power projects for utility
improvements; and providing for an effective
date."
SB 4006 was heard and HELD in Committee for
further consideration.
SENATE BILL NO. 4005
"An Act authorizing, as a temporary rebate of state
resources to certain state residents, payments to
assist in meeting heating costs under the federal and
state heating assistance programs; and providing for an
effective date."
11:46:25 AM
Co-Chair Hoffman pointed out that current oil prices have
approached $130 per barrel. At that price the state would
receive $3.6 billion. Alaska has benefited greatly by high
prices of oil; however, Alaskans are facing extremely high
costs of energy. The Governor has suggested that the
legislature come up with a temporary solution to this
problem. With this in mind, two pieces of legislation have
been introduced. One solution would add to the Power Cost
Equalization Program (PCE), and the second would subsidize
home heating expenses. The problem of energy costs is
difficult due to the variety of methods of heating in
Alaska. It is the legislature's duty to find a fair and
equitable way of addressing this problem.
Co-Chair Hoffman stated that the purpose of the meeting was
to have an overview of two bills, SB 4005 and SB 4006.
11:50:19 AM
JAY LIVEY, STAFF, SENATOR HOFFMAN, explained that SB 4005
deals with the high cost of heating oil in rural Alaska.
The first section increases the rates paid by the Low Income
Heating and Energy Assistance Program (LIHEAP). The fiscal
note is based on the assumption that the current rates being
paid will triple.
Mr. Livey related that the second section of SB 4005 says
that the cutoff for eligibility would be 350 percent of
poverty level, instead of the current level of 225 percent.
That would move the income level for a family of three to
around $90,000.
11:52:30 AM
Mr. Livey explained that LIHEAP has been operating in the
state for many years through the Department of Health and
Social Services. He related how the formula works. It
takes into account the community in which the client lives,
the type of house, income, disabilities, age, and the type
of fuel used. The more money the client pays for fuel, the
more the relief is. Another reason LIHEAP works for this
program is that it provides assistance statewide. LIHEAP is
an efficient delivery system and a way to provide timely
relief to Alaskans.
Mr. Livey reminded the committee that the money would not go
to individuals, but rather to vendors.
Co-Chair Hoffman requested an explanation of the intent of
the LIHEAP energy rebate program, which is no longer a low
income program.
11:56:25 AM
Mr. Livey clarified that the new LIHEAP program would
provide assistance to a family at 350 percent of poverty
level, which is not a poverty program. The formula that
LIHEAP uses is pro-rated based on income.
Senator Olson requested information about rural vendors that
do not take credit cards. Mr. Livey said that once the
application is approved and the amount of relief determined,
the fuel account would be drawn down. No money would change
hands.
Senator Olson hoped there would not be an interruption of
service due to lack of technology. Mr. Livey deferred to
the Department of Health and Social Services to explain that
process.
11:59:52 AM
Mr. Livey continued to say that approximately an additional
22,000 families would be eligible.
Co-Chair Hoffman requested price information. Mr. Livey
highlighted the fiscal note of $75 million.
Co-Chair Hoffman commented on the price tag of this bill,
which is $75 million, as compared to the Governor's bill,
which is $700 million. SB 4006, Power Cost Equalization,
also has a price tag of $75 million.
12:01:37 PM
Senator Thomas questioned the expansion of the LIHEAP
program. He gave examples of different sized families and
what they would qualify for. He spoke of resource rebate
inequity based on family size.
12:04:28 PM
Mr. Livey shared two criteria. The first is that 350
percent of poverty is used to determine eligibility based on
the number of individuals in a family. Once a family has
been determined eligible for the program, the amount of
benefit received is determined by a series of criterion used
to decide how much the family is entitled to.
Senator Thomas requested a copy of that information.
12:06:00 PM
Senator Dyson asked if LIHEAP funds are taxable. Mr. Livey
said they were not, nor were they subject to hold harmless.
Senator Dyson inquired about "degree heating days" as one of
the criteria. Mr. Livey deferred the question to the
Department of Health and Social Services.
Co-Chair Hoffman brought up another area of concern -
dependency on the program, similar to the revenue sharing
program. He pointed out that as income rose, benefits were
eliminated. He suggested considering that aspect if the
program continues beyond one year. He thought there were
ways to give protection to indicate that this is not an on-
going program.
12:10:01 PM
Senator Huggins asked how senior centers would be dealt with
under this program. Mr. Livey thought that this program
would pay for energy so long as no one else does, such as a
grant or non-profit agency.
Senator Huggins spoke of long-distance commuters and thought
that mass transportation could be a solution, but could
cause problems in the long run. He voiced concern about the
use of money based on resources that all of the people own
and "means testing".
Co-Chair Hoffman mentioned the resource rebate as another
approach toward addressing high energy costs.
Senator Huggins agreed, especially in that it is a temporary
solution. Co-Chair Hoffman suggested a sunset date on the
bill. The intent at this time is to get Alaskan's immediate
relief. Other facets of energy costs can be looked into at
a later date.
12:14:31 PM
RON KREHER, CHIEF OF FIELD OPERATIONS, DIVISION OF PUBLIC
ASSISTANCE, DEPARTMENT OF HEALTH AND SOCIAL SERVICES,
detailed the components of the LIHEAP program. It is one
aspect of the heating assistance programs and is 100 percent
federally funded. It serves households at 150 percent below
poverty level and is intended to offset heating costs for
low income families. The program is operated in conjunction
with nine tribal organizations. Last year $10,700,000 was
received by the federal government for LIHEAP. He listed
the number of households served - 15,000. He described the
kinds of people served. He listed residency requirements
and how payments must be used. Vendor payments are the
vehicle for covering the costs.
12:16:50 PM
Mr. Kreher identified the community home heating points used
to determine eligibility. These points, plus income, plus
the dollar amount available determine the payment to each
household. The Alaska Heating Assistance Program created
through HB 152 serves households between 150 and 225 percent
of poverty, outside of the federal program. He estimated
about 22,250 households will qualify for this program.
12:19:20 PM
Co-Chair Hoffman asked about tax implications of the current
and proposed programs. Mr. Kreher reported that the current
program payments are not taxable. The Department of Law is
researching the implications of the proposed higher levels.
Co-Chair Hoffman asked when that information would be
available. Mr. Kreher replied that he did not know.
Co-Chair Hoffman asked if the program the Governor is
proposing is taxable. Mr. Kreher said it was.
12:21:14 PM
Senator Huggins asked how to address the profile of a
household that lives "off the grid" and generates heat and
electricity from fuel oil. Mr. Kreher did not know. The
Alaska Heating Assistance Program only addresses heating
costs, not utility costs.
Senator Huggins spoke of the high cost to be connected to
the grid.
Co-Chair Hoffman thought it was an excellent example of an
item that requires looking at on a long-term basis in order
to address energy costs for all Alaskans.
12:23:15 PM
Senator Elton asked if a person has to apply on an annual
basis for either program. Mr. Kreher said they would.
Senator Elton assumed that those at the higher end of income
limits may be less inclined to participate than those at 150
percent. Mr. Kreher agreed. The majority of households now
served are below the federal poverty level. Many Alaskans
have an aversion to public assistance.
12:25:20 PM
Senator Elton noted that those who have not participated in
LIHEAP in the past are not limited to one vendor. Mr.
Kreher said that was correct.
Senator Thomas asked if LIHEAP is taxed. Mr. Kreher said
currently LIHEAP is not taxed. He reiterated that the
Department of Law is looking into whether the new program
would be taxed. Senator Thomas asked if both vendors and
individuals can receive payments. Mr. Kreher said yes. In
some instances direct payments are made to individuals.
Senator Thomas asked if the intention is for energy
assistance. Mr. Kreher agreed.
12:27:08 PM
Senator Thomas requested an explanation of the income
guidelines in a handout entitled "2008 Poverty Guidelines
for Alaska Income Guidelines as Published" (copy on file.)
Mr. Kreher detailed the annual guidelines. He could not be
specific about the amount of rebate because of not knowing
the other factors.
Co-Chair Hoffman added that the information could be found
on the web.
12:29:24 PM
Senator Thomas summarized that assistance is based on a
point system.
Mr. Kreher gave an example of a household in Anchorage that
qualifies for eight points due to location. If the
household had three bedrooms, the 8 points is multiplied by
1.3. For every child under 5, a point is added. If the
household had zero income, it would receive 100 percent of
the points, or 10 points. Depending on the availability of
funding, a dollar amount would apply against the points.
Last year that amount was $85. That household would have
been eligible for a grant of $850.
Senator Hoffman asked for an explanation of expedited cases.
Mr. Kreher explained that an expedited case is one that has
demonstrated an urgent need for assistance such as facing a
cut-off of utilities or heating costs greatly exceeding
income.
Mr. Livey referred to the numbers for Anchorage in the
document and pointed out an error.
Senator Hoffman said it was evident that the program is
broad based and addresses issues uniformly throughout the
state.
Mr. Kreher stated that the funds would be distributed fairly
throughout the state. He noted that the state shares its
tribal block grant with nine tribal organizations.
12:33:51 PM
SENATE BILL NO. 4006
"An Act amending the power cost equalization program,
repealing the exclusion from eligibility for power cost
equalization for certain power projects that take their
power from hydroelectric facilities, and amending the
definition of 'eligible electric utility' as it applies
to the power cost equalization program and the grant
program for small power projects for utility
improvements; and providing for an effective date."
Senator Hoffman surmised that the power cost equalization
program would be a two-year program and might possibly be
considered for implementation on a long-term basis. The
cost of the proposed program is about $75 million, as was
LIHEAP. The Governor's proposal was for about $700 million.
These two pieces of legislation are much smaller "ticket
items" and address the high costs of heating oil and
electricity throughout the state.
Mr. Livey touched on several major issues in the bill. He
stated that this piece of legislation addresses the high
cost of electricity. He pointed out that this bill no
longer makes a geographical assumption of eligibility of a
utility. It allows all utilities that provide electricity
that costs more than 1.2 percent above the average rate in
Anchorage, Fairbanks, and Juneau, which is about 15.4 cents
per kilowatt hour.
12:38:00 PM
Mr. Livey said that the bill proposes raising the maximum
level from .525 cents to $2.00 so that more relief goes to
more Alaskans. He pointed out that the current law only
provides relief for 6000 kilowatt hours per year. The bill
proposes to change the distribution by season so that during
winter months more relief would be available.
12:41:05 PM
Senator Elton noted an unintended consequence of the formula
basing costs on Juneau, Fairbanks, and Anchorage electrical
use when something extreme happens like the Snettisham
avalanche which caused Juneau's power costs to skyrocket.
PCE reimbursement under that scenario would be less. He
wondered if the bill's new formula addresses this problem.
Mr. Livey said he understands that PCE cost is based on
filings made with the Regulatory Commission of Alaska in
which utilities describe their costs. If an event takes
place and costs for the utility increase, those costs are
acknowledged by the rate setting system.
DAVID TEAL, DIRECTOR, LEGISLATIVE FINANCE DIVISION,
explained that the case in Juneau would affect PCE; however,
it was a fairly brief period of high rates and the impact
would be spread over several years and is a weighted
average. He said the floor would be more influenced by the
fact that Anchorage uses much more fuel than Juneau and
Fairbanks uses diesel for 47 percent of its power.
Senator Elton stated appreciation that this legislation is
based on cost rather than location. He assumed that if
there was a temporary spike in cost in an urban area it
would be accommodated under the new PCE formula.
Mr. Teal said that the base rate would have been adjusted
under the old formula as well.
12:45:57 PM
Senator Elton used the example of the Snettisham avalanche
to compare the old and new versions of PCE. Under the old
system there was no assistance to Juneau rate payers; under
the new system there would be energy relief to Juneau.
Mr. Teal said it was true that Juneau would be eligible
under the new PCE. He stated that he was not sure that the
system was designed to be used for only a portion of the
year. He gave an example of excessive costs in Fairbanks.
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY, AND
ECONOMIC DEVELOPMENT, stated that Section 2 of the bill
would have allowed Juneau to be eligible.
Senator Huggins asked about the households with the most
expensive kilowatt hour costs.
12:49:10 PM
Ms. Fisher-Goad requested clarification of the question.
Senator Huggins wondered how many people were "off grid".
Ms. Fisher-Goad stated she did not have information on un-
served, "off grid" areas.
Senator Huggins felt it important to identify who is "off
grid" as soon as possible. Ms. Fisher Goad agreed, but
thought it would require legislative assistance.
Mr. Teal pointed out that the current and proposed PCE
legislation make utilities eligible for PCE reimbursement.
Senator Huggins pointed out that people "off grid" will need
assistance, too.
Co-Chair Hoffman thought the cost of transporting fuel to
the site was what drove up the cost of generating
electricity in rural Alaska.
12:53:40 PM
Co-Chair Hoffman asked if some communities would fall off
eligibility if the floor were to be raised.
Ms. Fisher-Goad said there are a few communities in the
North Slope Borough that would not be eligible.
Senator Thomas cited the "Power Cost Equalization Program"
(copy on file) costs under various assumptions. He asked
about the low costs in Lime Village and if they were based
on low population.
Mr. Livey thought that they were paying the difference
between $52.4 and $1.17 per kilowatt under current law.
Senator Thomas thought the numbers did not add up.
Mr. Teal referred to a handout for further information.
12:56:56 PM
Co-Chair Hoffman inquired if electric line extension
programs are "still on the books".
Ms. Fisher-Goad reported that the electrical service
extension fund was repealed several years ago. Such
programs are typically funded by grants.
12:57:48 PM
Co-Chair Hoffman referred to the Estimated FY 2009 General
Fund chart (copy on file.) He asked if Alaska received
about $10 billion in oil revenues last year. Mr. Teal said
it did. Co-Chair Hoffman inquired if general fund
expenditures totaled $4 billion a year. Mr. Teal agreed.
Co-Chair Hoffman summarized that last year Alaska started
off with a debt of $5.2 billion to the Constitutional Budget
Reserve (CBR). He pointed out that $4 billion was paid off.
He wondered what the balance of the CBR was today.
Mr. Teal reported that after last year's legislative session
there was a deficit projected of about $200 million based on
the official oil forecast, which turned out to be about $1.1
billion low. At the end of FY 08, the forecast on the year
end surplus or deficit is now a surplus of about $900
million and would have been swept into the CBR on June 30.
12:59:39 PM
Mr. Teal observed that the surplus is approximately $900
million, which would have been swept into the CBR, along
with the $4 billion that was previously appropriated to the
CBR. Currently, about $4.9 billion of the $5.2 billion has
been repaid.
Co-Chair Hoffman summarized that $300 million is still owed.
Next year, if the price of oil averages even $110 per
barrel, Alaska will have just under $12 billion in revenue.
The $300 million will be paid off - just a drop in the
bucket of the CBR. The state will have an operating budget
in the neighborhood of $4 billion, which will leave
potentially $8 billion in revenue. This gives the
appearance to the general public that the state is "awash in
money". He questioned what the state is doing to assist
Alaskans with energy relief. He maintained that the
legislature needs to look at ways to help Alaskans in light
of the anticipated surplus.
ADJOURNMENT
The meeting was adjourned at 1:04 PM.
| Document Name | Date/Time | Subjects |
|---|