02/23/2010 03:00 PM House ENERGY

         HB 303-SMALL BUSINESS ENERGY EFFICIENCY GRANTS                                                                     
                                                                                                                                
3:54:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT announced that the  next order of business would                                                               
be HOUSE  BILL NO.  303, "An Act  establishing the  Alaska energy                                                               
efficient small business grant fund and program."                                                                               
                                                                                                                                
3:54:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURT OLSON, Alaska  State Legislature, thanked the                                                               
committee for its work and introduced his aide.                                                                                 
                                                                                                                                
3:55:20 PM                                                                                                                    
                                                                                                                                
JENNIFER SENETTE, Staff, Representative  Kurt Olson, Alaska State                                                               
Legislature,  introduced  HB  303  on  behalf  of  Representative                                                               
Olson, prime  sponsor.   Ms. Senette  referred to  Alaska Housing                                                               
Finance  Corporation's  (AHFC)   successful  home  energy  rebate                                                               
program and said that this  legislation was intended to open that                                                               
program to small  businesses.  HB 303 would  allow small business                                                               
owners  wishing  to ameliorate  the  energy  efficiency of  their                                                               
buildings to receive  a rebate for some of the  expenditures.  As                                                               
with  the  homeowner program,  HB  303  would require  an  energy                                                               
efficiency   rater  evaluate   the  business   structure  to   be                                                               
retrofitted before  and after  the improvements.   The  amount of                                                               
the  rebate  would   be  determined  by  the   amount  of  energy                                                               
efficiency  gained by  making the  improvements, and  by receipts                                                               
for  the completed  work  and  materials.   The  bill sets  three                                                               
guidelines for  the businesses  to meet in  order to  qualify for                                                               
the program.  Firstly, the assessed  value of the structure to be                                                               
retrofitted cannot  exceed $1 million.   Secondly,  the structure                                                               
must be  owned by a person  or persons licensed by  the state and                                                               
with  no outstanding  liabilities  to the  state.   Thirdly,  the                                                               
structure  must  meet criteria  adopted  by  AHFC.   Ms.  Senette                                                               
anticipated questions  and noted  that representatives  from AHFC                                                               
and the Alaska Energy Authority (AEA) were available to testify.                                                                
                                                                                                                                
3:58:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM  observed that  a small business  may be                                                               
operated out  of a  home or  garage.  She  surmised that  type of                                                               
small business would not qualify.                                                                                               
                                                                                                                                
MS. SENETTE suggested  the bill sponsor would be  willing to work                                                               
on that point.                                                                                                                  
                                                                                                                                
3:59:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DAHLSTROM  stated  her belief  in  the  sponsor's                                                               
intent  to include  businesses, such  as sub-contractors  and day                                                               
care owners, who may work at home.                                                                                              
                                                                                                                                
                                                                                                                                
CO-CHAIR  EDGMON  asked  whether a  non-resident  small  business                                                               
owner would qualify.                                                                                                            
                                                                                                                                
3:59:50 PM                                                                                                                    
                                                                                                                                
MS. SENETTE responded that there is  no language in the bill that                                                               
requires residency.                                                                                                             
                                                                                                                                
CO-CHAIR EDGMON  asked whether the  rater concept is the  same as                                                               
the residential users.                                                                                                          
                                                                                                                                
4:00:43 PM                                                                                                                    
                                                                                                                                
MS. SENETTE  said yes.  HB  303 is intended to  "mirror" the home                                                               
energy  rebate program.    She suggested  more  details could  be                                                               
provided by AHFC.                                                                                                               
                                                                                                                                
4:01:06 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON expressed  his concern about the  bill because of                                                               
the limited  amount of funds  available for residential  users of                                                               
the home  energy rebate program.   Since  only 10 percent  of the                                                               
state has participated, a vast number  of homes in the state have                                                               
yet to participate.   Co-Chair Edgmon understood  the benefits of                                                               
helping   small  businesses;   however,   he  cautioned   against                                                               
diverting  money and  preventing residential  users from  getting                                                               
rebates on their homes.                                                                                                         
                                                                                                                                
4:02:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON recalled  there were  problems in  drafting                                                               
the bill during  the interim because the amount  of surplus funds                                                               
was unknown,  and the success  of the  new AHFC program  was also                                                               
unknown.  He surmised that there  is a fair amount of surplus and                                                               
said, "But  again, that's probably  something that will  be dealt                                                               
with by the finance committee."                                                                                                 
                                                                                                                                
                                                                                                                                
REPRESENTATIVE TUCK referred to page 2,  line 7, of the bill, and                                                               
asked  whether  a business  owner  who  leased property  for  the                                                               
business would qualify.                                                                                                         
                                                                                                                                
4:04:05 PM                                                                                                                    
                                                                                                                                
MS.  SENETTE said  the  bill is  intended for  the  owner of  the                                                               
business.                                                                                                                       
                                                                                                                                
4:04:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK gave  an  example of  a  business owner  who                                                               
wanted to install new windows in a space he or she leased.                                                                      
                                                                                                                                
MS. SENETTE  said she will have  to get back to  the committee in                                                               
this regard.                                                                                                                    
                                                                                                                                
4:04:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DAHLSTROM  asked whether  the sponsor  objected to                                                               
the addition of a residency requirement.                                                                                        
                                                                                                                                
REPRESENTATIVE OLSON indicated no.                                                                                              
                                                                                                                                
REPRESENTATIVE   DAHLSTROM  said   a  residency   requirement  is                                                               
essential.                                                                                                                      
                                                                                                                                
4:05:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN noted  that many  small business  owners                                                               
who operate from a leased space  pay for utilities and may not be                                                               
able to talk the building  owner into making energy improvements.                                                               
He asked whether  the sponsor knows how to help  an owner in that                                                               
situation.                                                                                                                      
                                                                                                                                
4:06:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON voiced the  sponsors' intent to start small,                                                               
get the program up and running, and let it develop and grow.                                                                    
                                                                                                                                
4:07:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT  observed  that  although  she  understood  the                                                               
concern for  businesses located  in malls,  the intent  was truly                                                               
for small business.                                                                                                             
                                                                                                                                
BRYAN     BUTCHER,  Director,   Governmental  Affairs   &  Public                                                               
Relations, Alaska Housing  Finance Corporation (AHFC), Department                                                               
of Revenue (DOR), in response  to Co-Chair Edgmon, explained that                                                               
AHFC  does  not have  a  definition  of  a  small business.    He                                                               
deferred to the bill sponsor.                                                                                                   
                                                                                                                                
4:08:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON  relayed his  support of the  concept of  HB 303,                                                               
but perhaps not  the mechanism.  He suggested a  loan program may                                                               
be better.   He then asked  for AHFC's position on  the impact HB
  would  have  on  the  residential  homeowner  energy  rebate                                                               
program.                                                                                                                        
                                                                                                                                
4:10:20 PM                                                                                                                    
                                                                                                                                
MR. BUTCHER  acknowledged that home  energy rebate  program funds                                                               
are fully  encumbered, although funds will  become available from                                                               
those  who  do  not  complete  the  program.    Furthermore,  the                                                               
weatherization funds  will be spent  in FY  2011.  It  is certain                                                               
that the passage  of HB 303 will require additional  funding.  He                                                               
said  the  possibilities  for  a   loan  program  may  include  a                                                               
revolving  loan fund  with energy  performance  contracting.   In                                                               
response  to an  earlier question  as  to how  the energy  audits                                                               
would work for  this, he explained that the  AKwarm software that                                                               
is  used for  the ratings  on  the residential  program is  being                                                               
expanded for use on commercial buildings.                                                                                       
                                                                                                                                
4:11:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR EDGMON expressed  his sense of discomfort  with the bill                                                               
as it currently stands, and gave  the example of a $10,000 rebate                                                               
approved for a  $1 million building.  He suggested  that the bill                                                               
sponsor consider  a separate program  that the  legislature would                                                               
put more  money into.  In  that case, he would  also support more                                                               
money for  the current  residential and  weatherization programs.                                                               
Co-Chair Edgmon  said further  conversations about  helping small                                                               
businesses,  residential  users,  and  housing  authorities  with                                                               
weatherization  money  should take  place  in  the House  Finance                                                               
Committee.   He said,  "I am  saying that  I do  have a  level of                                                               
discomfort with the  bill as it's presently  structured because I                                                               
think  there  are  some  fundamental   issues  that  need  to  be                                                               
addressed somewhere along the line."                                                                                            
                                                                                                                                
4:14:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHANSEN referred to page  2, line 4, of the bill,                                                               
and asked  whether AHFC provided  loans for small  businesses for                                                               
new structures.                                                                                                                 
                                                                                                                                
MR. BUTCHER answered  that AHFC is strictly  residential and does                                                               
not have  relationships with  small businesses.   He  opined this                                                               
language is probably fashioned on  the home energy rebate program                                                               
in that owners  can qualify for a  rebate if they build  a new, 5                                                               
Star Plus home.                                                                                                                 
                                                                                                                                
4:15:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EDGMON  asked whether  the AKwarm software  has to                                                               
be updated for use on businesses.                                                                                               
                                                                                                                                
MR.  BUTCHER said  yes, but  that  is something  AHFC is  already                                                               
doing  as part  of  negotiations with  the  Department of  Energy                                                               
(DOE) and for requirements in other legislation.                                                                                
                                                                                                                                
CO-CHAIR   EDGMON   asked   whether   another   mechanism   might                                                               
incorporate this concept.                                                                                                       
                                                                                                                                
MR. BUTCHER acknowledged that this could be discussed.                                                                          
                                                                                                                                
4:16:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT relayed that the  sponsor offered the bill as an                                                               
amendment  to the  energy omnibus  bill, so  that option  remains                                                               
available to the committee.                                                                                                     
                                                                                                                                
4:17:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  referred to  page 2, line  14, of  the bill,                                                               
and asked whether a business  owner with several properties would                                                               
qualify for improvements to only one property.                                                                                  
                                                                                                                                
MR.  BUTCHER imagined  it would  be  a situation  where only  one                                                               
address could be used one  time, although this would be discussed                                                               
as the program is set up.                                                                                                       
                                                                                                                                
[Co-Chair Millett turned the gavel over to Co-Chair Edgmon.]                                                                    
                                                                                                                                
4:18:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK gave several examples of business ownership.                                                                
                                                                                                                                
                                                                                                                                
MR. BUTCHER confirmed  that AHFC would talk to  the Department of                                                               
Commerce,  Community,  &  Economic Development  (DCCED)  and  the                                                               
Alaska Energy Authority (AEA) in this regard.                                                                                   
                                                                                                                                
4:20:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS also  called attention to page  2, line 14,                                                               
of the bill.   He pointed out the difficulty  in establishing the                                                               
value of  a commercial building  in rural areas,  and unorganized                                                               
boroughs, where  there is  no tax  assessment by  a municipality.                                                               
Representative  Ramras  questioned  AHFC's ability  to  establish                                                               
parity  between   commercial  buildings  in   Dillingham,  Ekwok,                                                               
Fairbanks, and Anchorage.                                                                                                       
                                                                                                                                
[Co-Chair Edgmon returned the gavel to Co-Chair Millett.]                                                                       
                                                                                                                                
4:21:38 PM                                                                                                                    
                                                                                                                                
MR. BUTCHER  deferred the question to  AEA as AHFC does  not have                                                               
this expertise.                                                                                                                 
                                                                                                                                
4:22:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   RAMRAS  re-stated   his  question   as  to   the                                                               
methodology  to assess  the value  of a  building, especially  in                                                               
rural areas or an unorganized  borough, in order to ascertain the                                                               
dollar value  and observe the guidelines  and procedures referred                                                               
to in the bill.                                                                                                                 
                                                                                                                                
4:22:35 PM                                                                                                                    
                                                                                                                                
SARA FISHERGOAD,  Deputy Director, Operations,  Alaska Industrial                                                               
Development  &   Export  Authority  (AIDEA)  and   Alaska  Energy                                                               
Authority (AEA),  Department of  Commerce, Community,  & Economic                                                               
Development,  stated   she  would  talk  to   other  experts  for                                                               
guidance.                                                                                                                       
                                                                                                                                
4:23:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAMRAS said  this is  a significant  hurdle.   He                                                               
suggested the  solution of making  any structure in  rural Alaska                                                               
eligible  for the  credit.   Other  suggestions were  to use  the                                                               
population density  in the community  or the number  of employees                                                               
as the method for determining eligibility.                                                                                      
                                                                                                                                
4:24:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN pointed out the  need for a definition of                                                               
"small business."   He  recalled that  the federal  definition of                                                               
small business  is one  with 100 employees  or less;  however, in                                                               
most of  Alaska, a business  with 99 employees is  not considered                                                               
small.   This  definition  may  vary in  different  areas of  the                                                               
country.                                                                                                                        
                                                                                                                                
4:25:56 PM                                                                                                                    
                                                                                                                                
CO-CHAIR MILLETT noted  several questions on the bill.   She said                                                               
she and Co-Chair Edgmon intend to  hold the bill but continue the                                                               
discussion.                                                                                                                     
                                                                                                                                
4:26:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON  informed the  committee  that  one of  the                                                               
concepts was to establish value  on a square footage basis, which                                                               
would get around the regional issue.                                                                                            
                                                                                                                                
REPRESENTATIVE TUCK also supported the square footage concept.                                                                  
                                                                                                                                
4:27:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAMRAS assured members  he is a small businessman,                                                               
even though  he has  250 employees, when  compared to  the giants                                                               
that he is  competing against.  For example,  Silver Bay Seafoods                                                               
in Sitka  moves 31 million pounds  of seafood, but is  small when                                                               
compared  to Ocean  Beauty and  Trident Seafood.   He  urged that                                                               
the numeric values  of employees should not be  used to determine                                                               
what is a small business.                                                                                                       
                                                                                                                                
4:29:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  EDGMON observed  that the  intertie between  energy and                                                               
economics is very  real.  He expressed his support  of efforts by                                                               
the  legislature to  help small  businesses,  such as  commercial                                                               
fishermen, through loan programs or in other ways.                                                                              
                                                                                                                                
4:30:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  MILLETT   announced  that  HB  303   was  held  pending                                                               
forthcoming amendments.