04/05/2012 01:30 PM House FINANCE

HOUSE BILL NO. 312                                                                                                            
                                                                                                                                
     "An  Act  creating  a  low-interest   loan  program  for                                                                   
     homeowners  who  convert  their homes  to  natural  gas-                                                                   
     fired  heating;  and  creating   the  natural  gas  home                                                                   
     heating conversion loan fund."                                                                                             
                                                                                                                                
Vice-chair  Fairclough  MOVED  to  ADOPT  proposed  committee                                                                   
substitute  for  HB  312,  Work  Draft  27-LS1301\E  (Nauman,                                                                   
4/4/12).                                                                                                                        
                                                                                                                                
Co-Chair Stoltze OBJECTED for discussion.                                                                                       
                                                                                                                                
3:12:32 PM                                                                                                                    
                                                                                                                                
JOE  MICHEL, STAFF,  REPRESENTATIVE  BILL STOLTZE,  explained                                                                   
the changes included  in the CS. He remarked that  the CS was                                                                   
"structurally  different"  from   the  original  legislation.                                                                   
Additional  sections were  rolled into  Section 1. The  word,                                                                   
"inspection" replaced  "energy audit" throughout  the bill. A                                                                   
registered mechanical  contractor was authorized,  along with                                                                   
energy  raters  to perform  inspections.  All  references  to                                                                   
"loan fund"  were replaced  with "loan  program." On  Page 3,                                                                   
lines 3-4  were added:  "…shall be  deposited in the  general                                                                   
fund  and may  be  appropriated for  the  loan program  under                                                                   
this section or for any other public purpose."                                                                                  
                                                                                                                                
Representative Wilson  introduced the legislation  by reading                                                                   
the following:                                                                                                                  
                                                                                                                                
     HB  312   will  create  a  low-interest   loan  program,                                                                   
     administered by  the Alaska Housing  Finance Corporation                                                                   
     for  homeowners  who use  oil,  coal,  or wood  to  heat                                                                   
     their  homes  so they  can  convert  to a  natural  gas,                                                                   
     propane,  electric, biomass,  or  district heat  heating                                                                   
     appliance.                                                                                                                 
                                                                                                                                
     Originally,  HB 312  would  only provide  loans for  the                                                                   
     conversion  to a  natural  gas-fired heating  appliance.                                                                   
     However,  through  the  committee  process, HB  312  was                                                                   
     expanded  to include  propane,  biomass, electric  heat,                                                                   
     and  district heat.   The  committee  substitute for  HB
   now  provides   for  a   statewide  approach   for                                                                   
     homeowners   to  convert  to   a  more  affordable   and                                                                   
     efficient  heating method.   Propane can be  utilized in                                                                   
     Alaska's rural  communities.   Biomass heat in  the form                                                                   
     of  pellets  is  growing  in  popularity  and  could  be                                                                   
     implemented   in  the  Rural   Interior  and   Southeast                                                                   
     portions  of the State.   Electric  heat has now  become                                                                   
     more affordable  in Kodiak and the Southeast  regions of                                                                   
     Alaska.     Finally,  district  heat  is   available  in                                                                   
     communities  that have combined  heat and power  plants,                                                                   
     such  as in  Fairbanks' downtown  coal  plant where  the                                                                   
     by-product  steam and  hot  water are  pumped through  a                                                                   
     pipe  system  providing   affordable  and  emission-free                                                                   
     heat to customers.                                                                                                         
                                                                                                                                
     My office  has worked  carefully with  AHFC to  create a                                                                   
     statewide program  offering loans up to $7,500,  at a 1%                                                                   
     interest rate for  a term of 10 years.   The loans would                                                                   
     only cover  the cost of  the heating appliance,  and not                                                                   
     the cost of  materials and installation.   Loans will be                                                                   
     offered to  qualified applicants who use  either heating                                                                   
     oil, coal,  or wood as their  primary heat source.   The                                                                   
     heat sources  which the homeowner  wishes to  convert to                                                                   
     must be readily  accessible for use. HB  312 requires an                                                                   
     inspection by  either an AHFC certified energy  rater or                                                                   
     a  registered mechanical  contractor,  who will  confirm                                                                   
     the heating  method the homeowner  uses, and  provide an                                                                   
     explanation   of  the  potential   energy  savings   the                                                                   
     homeowner  could see  if they  converted to  one of  the                                                                   
     options available through the program.                                                                                     
                                                                                                                                
     HB  312 will  have  additional benefits  to  communities                                                                   
     who   have  been   designated   by  the   EPA  to   have                                                                   
     unacceptable  air   quality  levels.     Currently,  the                                                                   
     Fairbanks  North  Star Borough  has  been designated  by                                                                   
     the  EPA as  a  PM 2.5  nonattainment  area.   The  low-                                                                   
     interest  loan program  created  by HB  312 would  allow                                                                   
     for  residents  of the  FNSB  to afford  conversions  to                                                                   
     cleaner,  more efficient heating  methods to  help abate                                                                   
     the high levels of particulates in our air.                                                                                
                                                                                                                                
Representative  Wilson spoke  to the  energy rebate  program.                                                                   
She noted  that the  energy rebate program  could be  used to                                                                   
recoup   costs   for   a  new   gas   fired   appliance   but                                                                   
reimbursement  was  dependent  on  a  weatherization  rating.                                                                   
Replacing doors,  windows, and enhancing  insulation recouped                                                                   
more costs  on the rating system  than a new  heating source.                                                                   
She pointed out  that the program provided loans  and was not                                                                   
a giveaway.                                                                                                                     
                                                                                                                                
Co-Chair Thomas  wondered whether the appliance  loan must be                                                                   
paid  before the  house  title could  be  transferred in  the                                                                   
case of a sale.                                                                                                                 
                                                                                                                                
3:17:34 PM                                                                                                                    
                                                                                                                                
Representative Wilson  assumed that the loan  applicant would                                                                   
repay the loan before the sale.                                                                                                 
                                                                                                                                
JOHN ANDERSON,  WEATHERIZATION PROJECT OFFICER,  RESEARCH AND                                                                   
RURAL  DEVELOPMENT,   ALASKA  HOUSING  FINANCE   CORPORATION,                                                                   
DEPARTMENT  OF REVENUE,  agreed that  the loan  would be  the                                                                   
responsibility of the applicant.                                                                                                
                                                                                                                                
Representative   Guttenberg   noted  that   the   legislation                                                                   
expanded  inspectors to  include  mechanical contractors.  He                                                                   
questioned   whether   there  were   sufficient   contractors                                                                   
capable to do  the work. Mr. Anderson affirmed  and clarified                                                                   
that  the  department   would  follow  the   same  regulatory                                                                   
process that  already qualify  the inspectors and  follow the                                                                   
regulations  in place  that  qualified  the state  mechanical                                                                   
administrator's license.                                                                                                        
                                                                                                                                
Vice-chair  Fairclough  noted the  indeterminate  FN 1  (DOR)                                                                   
fiscal note. She  wondered if the loan program  was funded or                                                                   
if the  legislation developed  the structure.  Representative                                                                   
Wilson  affirmed  that  money  for  the  loan  fund  was  not                                                                   
appropriated.  The legislation  set  up a  mechanism for  the                                                                   
loan fund.                                                                                                                      
                                                                                                                                
Vice-chair Fairclough  asked whether one percent  of the fund                                                                   
amount would  adequately cover the administrative  costs. Mr.                                                                   
Anderson  thought   that  one  percent  was   an  appropriate                                                                   
estimate.                                                                                                                       
                                                                                                                                
Vice-chair  Fairclough  wondered   how  many  homes  were  in                                                                   
Fairbanks  and  North  Pole.  Representative  Wilson  replied                                                                   
that  approximately  21,000  homes   qualified  as  a  single                                                                   
family home.                                                                                                                    
                                                                                                                                
Co-Chair Stoltze noted the need in the Mat-Su as well.                                                                          
                                                                                                                                
Representative  Doogan discerned  that  the program  provided                                                                   
zero interest  loans. Mr.  Anderson affirmed  and added  that                                                                   
the  one percent  interest  would go  back  into the  general                                                                   
fund.                                                                                                                           
                                                                                                                                
Co-Chair  Stoltze  WITHDREW  his OBJECTION.  There  being  NO                                                                   
further OBJECTION, Work Draft 27-LS1301\E was ADOPTED.                                                                          
                                                                                                                                
3:23:27 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze OPENED public testimony.                                                                                       
                                                                                                                                
Co-Chair Stoltze CLOSED public testimony.                                                                                       
                                                                                                                                
Vice-chair Fairclough  MOVED to  report CSHB 312(FIN)  out of                                                                   
Committee   with    individual   recommendations    and   the                                                                   
accompanying fiscal  note. There  being NO OBJECTION,  it was                                                                   
so ordered.                                                                                                                     
                                                                                                                                
CSHB 312(FIN) was REPORTED out of Committee with a "do                                                                          
pass" recommendation and previously published indeterminate                                                                     
fiscal note: FN1 (DOR).