Legislature(2017 - 2018)BARNES 124
03/16/2018 03:15 PM House LABOR & COMMERCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB329 | |
| HB374 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 329 | TELECONFERENCED | |
| + | HB 374 | TELECONFERENCED | |
| + | SB 4 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 374-ON-BILL FINANCING OF ENERGY IMPROVEMENTS
4:06:46 PM
CHAIR KITO announced that the final order of business would be
HOUSE BILL NO. 374, "An Act relating to on-bill financing by an
electric or gas distribution utility for certain energy
efficiency and conservation improvements."
4:07:06 PM
ROB EARL, Staff, Representative Adam Wool, Alaska State
Legislature, presented HB 374 on behalf of Representative Wool,
prime sponsor. He paraphrased the sponsor statement [included
in committee packet], which reads as follows [original
punctuation provided]:
HB 374 would allow a utility to voluntarily create an
on-bill financing or on-bill repayment program to help
customers finance energy improvements. The improvement
must utilize renewable energy or include switching to
a more efficient device or fuel that does not increase
greenhouse gas emissions. This legislation will be
particularly useful as the Interior Energy Project
expands its reach and a large number of Fairbanks
residents choose to convert from oil to natural gas to
heat their homes.
The on-bill financing program allows a utility
customer to borrow money for an energy improvement and
then repay it through a "meter conservation charge" on
their utility bill. A customer's utility bill, even
with the meter conservation charge, is often
immediately lower due to savings in energy costs due
to increased efficiency.
Examples of energy improvements that would qualify
under HB 374 include: adding solar panels to a house;
converting to a cleaner burning wood stove; and
converting a boiler or furnace to natural gas.
Weatherization projects such as upgrading windows or
insulation would not quality under this legislation.
HB 374 allows for utilities to create either an "on-
bill financing" or an "on-bill repayment" program.
Under the former type of program, the utility provides
the capital for the loan to the customer and under the
latter a third party financial institution would
provide the capital.
A utility may recoup all of their costs associated
with the program through a line item on the bill of a
customer who has elected to utilize the program for an
energy improvement. The balance of the costs on an on-
bill financing agreement may be recovered by the
utility when a property is sold.
HB 374 provides an optional tool for utilities and
their customers to lower energy costs and improve air
quality in Alaska.
4:10:10 PM
REPRESENTATIVE SULLIVAN-LEONARD asked how the transactions would
work if she decided to put a wind turbine on her property.
MR. EARL answered the electrical company would have to implement
the program. He suggested it may engage a bank and if wind
turbine was included in the options for things that can be
financed, the utility would act as "pass-through" for the
repayment. He said there would probably be an additional charge
on the utility bill to repay the costs. He said it's not
specified in the bill what the rate of interest on repayment
would be.
REPRESENTATIVE SULLIVAN-LEONARD surmised the whole premise is to
lower electricity costs. She asked how the bill would lower
costs.
MR. EARL explained the lending institution has extra assurance
that if the loan is behind, the utility will shut off power to
the customer. He gave the example of a $5,000 improvement with
a 10-year loan, at 3 percent the payment added to the monthly
bill would be around $48. He said once the charge is paid off,
the total bill would almost certainly be lower going into the
future.
4:14:02 PM
GENE THERRIAULT, Alaska Industrial Development and Export
Authority (AIDEA); Interior Energy Project (IEP), testified in
the hearing on HB 374. He said Alaska Energy Authority and
AIDEA had worked together with Interior communities for a more
affordable, cleaner source of fuel. He informed the Property
Assessed Clean Energy Act (PACE) legislation put in place to
target businesses and the on-bill mechanism of HB 374 has many
of the same attributes of the PACE legislation. He explained
the monthly bill would be used as a means to recapture a loan
payment for converting property to natural gas or solar panels.
He said that by attaching or borrowing the strength of that
relationship, it could lower rates of default. He added lower
default leads to lower interest rates.
MR. THERRIAULT referred to a working group that was set up in
the Interior to examine ways of incenting customers to avail
themselves of the mechanisms for transferring to natural gas.
He said the participants were asked to bring in recent bills and
then answer questions. He stated he was surprised that an on-
bill repayment mechanism was more popular than a lower interest
rate for a loan. He said the ability to finance an improvement
on their property and enjoy the benefit of the improvement and
pass on the obligation attached to the meter to the next owner
was popular.
MR. THERRIAULT spoke to research done with the Rural Utilities
Service (RUS) program at the United States Department of
Agriculture (USDA) for federal funds that could provide
financing to the consumer. He said he was surprised to find
that on-bill financing was proposed as a way to ensure low
default rates associated with the lending. He said if the
federal program was to offer low interest money, it would want
to ensure it is involved in low risk lending.
MR. THERRIAULT said a lot of arrangements made between the
parties would be put down in contracts to ensure that the
utility passes on the repayment to the lending institution. He
stated that on behalf of AIDEA and IEP, it is an important tool
for utilities. He spoke to further research on other states'
approach to on-bill financing and on state statutes to determine
if legislation is absolutely necessary. He indicated Alaska
state statute is silent on the issue. He said the proposed bill
would clarify in state law that on-bill financing is available
on a voluntary basis.
4:22:06 PM
JOMO STEWART, General Manager, Interior Gas Utility, testified
in support of HB 374. He thanked the sponsor for the
legislation.
4:22:43 PM
ALEC MESDAG, Director, Energy Services, Alaska Electric Light
and Power (AEL&P), testified in support of HB 374. He explained
this bill will provide a valuable tool, particularly among
consumers that have limited options. He surmised the proposed
bill wouldn't create an initial decrease in bills but that there
is still a lot of value in it. He suggested there is a tendency
to underestimate comfort as a defining factor. He stated
updating windows may not directly decrease bills, but the added
comfort would impact how high the heat is kept. He mentioned it
would be important to review how fuel switching is defined in
the proposed bill. He suggested it may be useful to include
some language to grant discretion to utilities to preclude
certain measures that could be a detriment to the system.
4:27:14 PM
REPRESENTATIVE JOSEPHSON asked how the sponsor would know about
what AEL&P would accept as a conservation measure.
MR. MESDAG said his concerns were very system-specific, so it
would need to be a general allowance.
4:28:16 PM
CHAIR KITO opened public testimony on HB 374.
4:28:35 PM
STUART COHEN, Interfaith Power and Light, testified in support
of HB 374. He said Interfaith Power and Light was attempting to
implement a program that replaces inefficient oil and electric
heating systems with air source heat pumps. He explained a heat
pump is like an air conditioner and can reduce heating bills by
40 percent to 70 percent. He said it costs about $4,100 to
install. He said they are used in China because the systems are
cheap. He spoke to modelling in Juneau, Alaska, on 8,901
private buildings. He said if Juneau, Alaska, were to convert
all 8,901 buildings in the model, the energy savings would
amount to nearly $10 million a year. He said the company who
carried out the modelling said that quick finance system is
crucial. He said that for those with a low income, it could be
hard to come up with the money for a heat pump. He said the
proposed bill, by enabling third party financing, would reduce
the risk for both borrower and lender.
4:32:47 PM
CEAL SMITH, Alaska Climate Action Network, testified in support
of HB 374. She stated her organization is very happy to see the
proposed bill. She mentioned the language in the proposed bill
is not clear regarding weatherization.
4:35:43 PM
CORY BORGESON, CEO, Golden Valley Electric, testified in support
of HB 374. He stated his is a not-for-profit electric utility.
He said he thinks the proposed bill is "fairly broad." He
indicated he was not certain that Golden Valley "would jump into
this," but that there are opportunities to provide financing for
its consumers to move into renewable energy products.
4:37:45 PM
CHAIR KITO held over HB 374.