03/01/2022 10:15 AM House ENERGY

               HB 358-RENEWABLE ENERGY GRANT FUND                                                                           
                                                                                                                                
10:26:41 AM                                                                                                                   
                                                                                                                                
CHAIR SCHRAGE  announced that the  final order of  business would                                                               
be HOUSE BILL  NO. 358, "An Act relating to  the renewable energy                                                               
grant  fund  and recommendation  program;  and  providing for  an                                                               
effective date."                                                                                                                
                                                                                                                                
10:26:44 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE BRYCE  EDGMON, Alaska State Legislature,  as prime                                                               
sponsor, offered a brief introduction to  HB 358.  He stated that                                                               
the proposed  legislation would extend the  Renewable Energy Fund                                                               
(REF)  grant  program,  which the  Special  Committee  on  Energy                                                               
created in  2009.  Following a  period of austerity in  the state                                                               
due to low  oil prices, he said  that in 2009 the  state had been                                                               
"flush" with  oil money.  At  that time there had  been an effort                                                               
to address energy needs with the  surplus of money, and the state                                                               
created energy  assistance programs,  including REF.   Since that                                                               
time, he  estimated $50  million to $100  million have  gone into                                                               
programs.  He  said, "Clearly this committee does not  need to be                                                               
reminded that  Alaska is  a storehouse  of vast  renewable energy                                                               
opportunities,  running  the  entire  gamut from  solar  down  to                                                               
geothermal, and the wind turbines."                                                                                             
                                                                                                                                
10:29:52 AM                                                                                                                   
                                                                                                                                
LAIB ALLENSWORTH,  Staff, Representative Bryce  Edgmon, presented                                                               
HB 358  on behalf  of Representative Edgmon,  prime sponsor.   He                                                               
stated that the  proposed legislation would extend  the REF grant                                                               
program for 10  years.  He reported that, since  its inception in                                                               
2008, REF  has distributed over  $275 million in grant  money for                                                               
renewable energy  projects.   He said that  244 grants  have been                                                               
given, and  95 projects are currently  providing renewable energy                                                               
to  high-cost energy  areas in  the state.   He  stated that  the                                                               
proposed legislation is  fairly simple.  It would  amend the 2008                                                               
law, as amended in  2012, to add a repeal date  of June 30, 2033.                                                               
An immediate effective date would be  added, and there would be a                                                               
fiscal  note  for   $1.4  million,  which  is   included  in  the                                                               
governor's budget.   He stated that the fiscal note  would be for                                                               
the maintenance  of the fund,  which includes  financial services                                                               
and the oversite  of existing and new grants.   He explained that                                                               
the REF  grant program operates  in rounds of  open applications,                                                               
and  currently  Round  14  is   in  process.    Applications  are                                                               
considered  based on  their economic  and technical  feasibility.                                                               
Once AEA makes recommendations, it  sends the applications to the                                                               
Renewable  Energy  Fund  Advisory Committee  (REFAC),  and  REFAC                                                               
sends its  recommendations to the  legislature for approval.   He                                                               
deduced that  improved technology would make  added resources for                                                               
renewable  energy   available;  thus,  AEA  would   receive  more                                                               
applications in the future.                                                                                                     
                                                                                                                                
10:32:38 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE RAUSCHER, referencing  the fiscal note, questioned                                                               
whether  the $1.4  million, under  services, would  be a  capital                                                               
outlay.  If so, he questioned which services would be funded.                                                                   
                                                                                                                                
REPRESENTATIVE  EDGMON responded  that  he had  asked DCCED  this                                                               
question.  He  clarified that the $1.4 million is  not new money.                                                               
It  is existing  money, operational  in  scope, used  to run  the                                                               
renewable energy  grant program.   He said the  competitive grant                                                               
process currently  is in Round  14, which entails an  infusion of                                                               
money  to administer.   He  explained that  since the  passage of                                                               
legislation  in  2016 the  funding  sources  for the  program  go                                                               
through  the "waterfall"  effect of  the Power  Cost Equalization                                                               
Endowment Fund.   He said that  the $1.4 million is  the money to                                                               
operate the  program with  AEA, and this  is already  embedded in                                                               
the budget.                                                                                                                     
                                                                                                                                
10:34:06 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  EDGMON,  in  response to  a  follow-up  question,                                                               
reiterated that  the money is  used to  operate the program.   He                                                               
deferred to Mr. Allensworth.                                                                                                    
                                                                                                                                
LAIB ALLENSWORTH  explained that  the $1.4  million is  for grant                                                               
management  oversite,  project   management,  and  technical  and                                                               
accounting support for  the fund.  He added that,  in general, it                                                               
provides  the maintenance  needed to  keep the  program going  by                                                               
supporting existing  projects and managing the  financial side of                                                               
the fund.                                                                                                                       
                                                                                                                                
10:35:12 AM                                                                                                                   
                                                                                                                                
CHAIR  SCHRAGE   requested  that   [a  representative   from  the                                                               
Department  of  Commerce,  Community,  and  Economic  Development                                                               
(DCCED)] clarify the funding [on the fiscal note].                                                                              
                                                                                                                                
10:35:28 AM                                                                                                                   
                                                                                                                                
CURTIS  THAYER,  Executive   Director,  Alaska  Energy  Authority                                                               
(AEA),   Department   of   Commerce,  Community,   and   Economic                                                               
Development,  explained  that the  $1.4  million  is the  current                                                               
funding for  [REF] Round 13.   He stated that the  fiscal note is                                                               
indeterminate  because  future  costs  of the  program  would  be                                                               
directly related  to the money  available to the fund,  number of                                                               
participants, and length of the  grants.  He explained that there                                                               
are  currently 38  active  grants,  and the  $1.4  million is  to                                                               
manage those grants with staff time  for the next five years.  He                                                               
continued  that if  there were  no funding  in the  future, there                                                               
would be  no future cost for  the program, as these  funds are to                                                               
maintain the  active grants.   He reiterated that [REF]  Round 14                                                               
is  complete,  and  through the  "cascading  waterfall"  [effect]                                                               
there is  $15 million  in the governor's  budget for  this round.                                                               
He stated that  39 applicants are going through  the process, but                                                               
not all of  these applicants will meet the standards.   He stated                                                               
that the $15  million covers these ongoing costs.   He reiterated                                                               
that future costs would be determined by the legislature.                                                                       
                                                                                                                                
10:37:36 AM                                                                                                                   
                                                                                                                                
MR. THAYER,  responding to a  follow-up question,  clarified that                                                               
AEA  currently has  budgeted funding  for  current grants  though                                                               
this  program.     He  explained   that  the  funding   would  be                                                               
indeterminate.  He  gave the following example: if  next year the                                                               
legislature puts  $50 million into  the program, the  fiscal note                                                               
would  be higher  because of  the  need to  manage the  increased                                                               
funds and  grants; if  the program is  unfunded next  year, there                                                               
would be  no cost for  maintaining the program because  no grants                                                               
would be issued.                                                                                                                
                                                                                                                                
10:38:50 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE CLAMAN questioned the  language in the fiscal note                                                               
analysis that related there would be  no new grants issued if the                                                               
proposed legislation is adopted.                                                                                                
                                                                                                                                
MR.  THAYER  responded that  the  language  is drafted  this  way                                                               
because the  proposed legislation would only  extend the program;                                                               
the approval  of future  grants would be  by the  legislature and                                                               
governor, and this remains unknown.   He stated that there is not                                                               
a  guaranteed revenue  source for  the  grant program,  as it  is                                                               
funded year  by year.   He added that  this year $15  million has                                                               
been requested,  last year $4.7  million had been  requested, and                                                               
the  previous  three  years  the legislature  did  not  fund  the                                                               
program.  He stated that if  the bill is adopted, no grants would                                                               
be issued until funding is approved.                                                                                            
                                                                                                                                
10:40:09 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE CLAMAN,  with a  follow-up comment,  expressed the                                                               
understanding that HB  358 would not authorize new  grants in and                                                               
of itself.   He  continued that  the legislature  could authorize                                                               
more grants  in a separate  action, but the  proposed legislation                                                               
would not create new grants.                                                                                                    
                                                                                                                                
MR.THAYER responded in agreement.                                                                                               
                                                                                                                                
10:40:30 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE FIELDS  questioned how REF would  work in relation                                                               
to   competitive    grants   disbursed   through    the   federal                                                               
Infrastructure  Investment and  Jobs Act  (IIJA).   He speculated                                                               
that there could  be dozens of competitive grants.   He expressed                                                               
the assumption  that some  of the  REF money could  be used  as a                                                               
match  to compete  for the  IIJA money.   He  requested that  Mr.                                                               
Thayer comment on this.                                                                                                         
                                                                                                                                
10:41:04 AM                                                                                                                   
                                                                                                                                
MR. THAYER responded that AEA  is investigating what is available                                                               
through IIJA,  as some  state funds may  be matched  with federal                                                               
dollars.  He  stated that historically around  $270 million [from                                                               
REF] has  been appropriated, and  there has been $138  million in                                                               
applicant matching funds to date.   He stated that matching grant                                                               
funds have  been successful, but  guidance is still  being sought                                                               
on  IIJA.   For  the committee's  current  purpose, the  proposed                                                               
legislation would  extend the  program to 2033.   He  stated that                                                               
IIJA would be one of the areas for future consideration.                                                                        
                                                                                                                                
10:42:07 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE EDGMON  recollected that  REF has often  been used                                                               
as startup  funding, directing the  money toward  the feasibility                                                               
or design  stage.  He suggested  that this has been  the practice                                                               
because renewable  energy ultimately does  not "pencil out."   He                                                               
added  that  renewable  energy is  worth  exploring  because  the                                                               
possibility  is  there.   He  referenced  communities  with  wind                                                               
turbine projects that were initially  feasible but do not operate                                                               
now.   Referencing the purpose of  the grants from REF,  he asked                                                               
Mr. Thayer whether this money  would align with the "shovel ready                                                               
aspect" of IIJA money.  He  considered that it may complement the                                                               
federal money.                                                                                                                  
                                                                                                                                
MR. THAYER replied that this is  a good point.  He clarified that                                                               
much of  REF is for  start-up money  and provided the  example of                                                               
the hydro  project in Angoon  which is now requesting  IIJA funds                                                               
to move  to the construction  stage.   He continued that  many of                                                               
the REF  grants were given  to test  the viability of  a project.                                                               
Referencing the  history of REF,  he said  that the fund  has put                                                               
$34 million towards  Railbelt issues and $250  million into rural                                                               
Alaska.   He  said  that  [REF] Round  13  [grants] include  wind                                                               
feasibility  in  Unalaska, hydro  storage  in  Cordova, and  wind                                                               
energy feasibility  and conceptual  design in  Goodnews Bay.   He                                                               
considered that most  of these are the building  blocks to obtain                                                               
additional federal funding, whether it  is IIAJ or other sources.                                                               
He explained  that AEA  also has a  Power Project  Fund providing                                                               
loans for feasibility, final  design, or preliminary construction                                                               
on viable projects.   He said that  this fund can also  work as a                                                               
complementary program, but  the first step would  be to determine                                                               
the feasibility.                                                                                                                
                                                                                                                                
10:45:28 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE FIELDS  said, "That's very  compelling information                                                               
that motivates  me more to help  get this bill across  the finish                                                               
line."   He  questioned whether  the  $15 million  in the  budget                                                               
would be  "adequate to position  us to do the  necessary planning                                                               
to  compete for  these funds."    He expressed  the opinion  that                                                               
[AEA]  has more  competition  for funds  than  the other  [DCCED]                                                               
programs.                                                                                                                       
                                                                                                                                
10:45:58 AM                                                                                                                   
                                                                                                                                
MR. THAYER responded that when AEA  made its budget for the year,                                                               
$15 million had been set  aside for legislative consideration for                                                               
this program.   He  said that  during this  time AEA  began [REF]                                                               
Round  14 with  39 applicants  for a  total of  $19.2 million  in                                                               
requests.  He  expressed the opinion that  some applications will                                                               
be disqualified for  various reasons, but AEA  is well positioned                                                               
within the  [designated] $15 million.   He suggested that  in the                                                               
future the  legislature may want  to direct attention  to raising                                                               
the eligibility  cap for communities.   He stated that  right now                                                               
AEA  is  operating  at  $1   million  while  grant  requests  are                                                               
operating at  $500,000.  He  expressed the realization  that this                                                               
is   not  currently   under   consideration   for  the   proposed                                                               
legislation.                                                                                                                    
                                                                                                                                
10:47:21 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  EDGMON,   in  reference   to  a  point   made  by                                                               
Representative Fields,  stated that  the legislature  renews many                                                               
different  state boards.   He  explained that  [renewing the  REF                                                               
program]  for   10  years  is  justified   considering  the  past                                                               
performance  of the  fund and  support  it would  provide in  the                                                               
future.  He  suggested that the extension  would give communities                                                               
which  currently do  not qualify  for a  grant an  opportunity to                                                               
apply in  the next few years.   He questioned whether  the Denali                                                               
Commission has  come before  the committee.   He stated  that the                                                               
Denali Commission is  receiving $75 million through  IIJA and has                                                               
an interest in energy projects.   He suggested that the committee                                                               
invite the commission to join the conversation.                                                                                 
                                                                                                                                
10:48:41 AM                                                                                                                   
                                                                                                                                
MR. THAYER,  in response to Representative  Rauscher, stated that                                                               
he would  provide to the committee  a cost breakdown of  the $1.4                                                               
million over the past two years.                                                                                                
                                                                                                                                
CHAIR SCHRAGE,  in response  to Representative  Edgmon, commented                                                               
that  the  committee  would welcome  the  Denali  Commission  and                                                               
questioned whether Mr.  Thayer would be able  to facilitate this.                                                               
He added that  the committee would also be  interested in further                                                               
discussions with AEA about some of the grant opportunities.                                                                     
                                                                                                                                
MR.  THAYER responded  that  he  would reach  out  to the  Denali                                                               
Commission.   He pointed out that  AEA has been working  with the                                                               
Denali Commission  as a  primary partner  on powerhouse  and bulk                                                               
fuel projects,  and discussions have  focused on the  $75 million                                                               
[from IIJA].   He added that  about $1.1 billion would  be needed                                                               
to  maintain  these   two  programs,  and  AEA   and  the  Denali                                                               
Commission have  been tackling  this.   He acknowledged  that not                                                               
all of the [$75 million] would  be available to the state, as the                                                               
Denali Commission has other projects.                                                                                           
                                                                                                                                
10:50:51 AM                                                                                                                   
                                                                                                                                
CHAIR SCHRAGE opened public test on HB 358.                                                                                     
                                                                                                                                
10:51:12 AM                                                                                                                   
                                                                                                                                
MICHAEL ROVITO,  Deputy Director, Alaska Power  Associates (APA),                                                               
shared that  APA is  a statewide  trade association  for electric                                                               
utilities  in Alaska  serving more  than 500,000  Alaskans across                                                               
the state.  He offered that APA  is in full support of HB 358 and                                                               
strongly urges passage of the bill  this session.  He stated that                                                               
many  of APA's  electric  utility members  have received  crucial                                                               
funding from  REF.   These funds have  supported the  addition of                                                               
renewable energy  projects which have lowered  reliance on diesel                                                               
fuel, stabilized rates,  and decreased the carbon  footprint.  As                                                               
mentioned during the hearing, he  stated that there have been 244                                                               
REF grants  totaling $275 million since  the program's inception.                                                               
These funds have helped build  over 95 operating projects, saving                                                               
more than 30  million gallons of diesel each year.   He expressed                                                               
the  opinion that  REF is  an extremely  valuable program  and is                                                               
worthy  of  continued  operation.    He  drew  attention  to  the                                                               
numerous projects  under consideration  for future rounds  of REF                                                               
grants.  As  in the past, a deliberative process  run by the AEA,                                                               
and reviewed by REFAC, would  choose the projects.  Extending the                                                               
sunset date of  the program would continue the  innovation of the                                                               
power systems in the state.   He thanked the bill sponsor and the                                                               
committee.                                                                                                                      
                                                                                                                                
10:53:17 AM                                                                                                                   
                                                                                                                                
CHAIR  SCHRAGE, after  ascertaining  there was  no  one else  who                                                               
wished to testify, closed public testimony on HB 358.                                                                           
                                                                                                                                
10:53:23 AM                                                                                                                   
                                                                                                                                
CHAIR SCHRAGE announced HB 358 was held over.