Legislature(2021 - 2022)BELTZ 105 (TSBldg)
04/23/2021 01:30 PM Senate LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB26 | |
| SB17 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 17 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 26 | TELECONFERENCED | |
SB 17-ENERGY EFFICIENCY & POLICY: PUB. BLDGS
2:09:50 PM
CHAIR COSTELLO announced the consideration of SENATE BILL NO. 17
"An Act relating to the retrofitting of certain public
facilities and community facilities; relating to the performance
of energy audits on schools and community facilities; relating
to the duties of the Alaska Energy Authority and the Alaska
Housing Finance Corporation; creating a rapid economic recovery
office in the Alaska Industrial Development and Export
Authority; and relating to the state energy policy and energy
source reporting by state agencies."
[CSSB 17(CRA) was before the committee.]
2:10:19 PM
SENATOR TOM BEGICH, Alaska State Legislature, Juneau, Alaska,
sponsor of SB 17 introduced the legislation paraphrasing the
sponsor statement that read as follows:
The State of Alaska is responsible for over $650
million in energy costs associated with close to 5,000
state owned public facilities. With significant
economic headwinds visible on the horizon, reducing
the state's energy costs through sound investments in
clean energy not only makes good fiscal sense; it also
fulfills a legislative promise of bringing renewable
energy to Alaskan communities.
In 2010, the Alaska State Legislature passed HB 306,
which established a State goal of obtaining 50 percent
of our State energy needs from renewable energy by
2025. With some of the highest energy costs in the
nation, increasing the share of renewable electricity
and heat will save the State money and help insulate
costs from volatility in fuel pricing. Also, in 2010,
the Alaska Sustainable Energy Act set forth a goal of
retrofitting 25% of the state's buildings over 10,000
square feet for energy efficiency by 2020,
successfully achieving that goal in 2014.
Building on the successes of the Alaska Sustainable
Energy Act, SB 17 extends the energy efficiency
retrofit program to schools and community centers
which are eligible for the Power Cost Equalization
Program. This creates incentives to reform retrofits
for buildings which receive State support for their
energy bills, which will save the State, school
districts, and communities' money.
However, single retrofit projects may not be
attractive or profitable to private retrofit
enterprises. SB 17 also directs the Alaska Industrial
Development and Export Authority (AIDEA) to establish
a rapid economic recovery office to facilitate state
energy policy and encourage private investment. This
new office will review energy audits, identify
retrofit and other clean energy projects to be
bundled, marketing those projects to and engage with
Department of Transportation and Public Facilities to
contract with private investors. This will ensure the
benefits of the state's energy policy, clean energy,
and energy retrofitting will proliferate into rural
communities, rather than just reaching the goal
through one large Railbelt project.
SB 17 will provide rapid economic recovery by bringing
in new investment to support an Alaska based clean
energy industry and reduce the challenges and barriers
that may prevent private companies from investing in
Alaska's infrastructure development.
2:14:42 PM
LOKI TOBIN, Staff, Senator Begich, Juneau, Alaska, presented a
PowerPoint as an overview of SB 17. She explained that the bill
amends existing statute to extend the authority of the
Department of Transportation and Public Facilities (DOTPF) to
use energy performance contracting to help reduce energy costs
in public facilities. The legislation will leverage state
capacity and expertise to assist the Alaska Industrial
Development and Export Association (AIDEA) in establishing an
economic recovery office that will help to bundle, market, and
support small projects and retrofits that may not be
economically viable on their own. Additionally, she said SB 17
asserts an energy policy that will move the state toward the use
of more renewable energy resources by 2026.
MS. TOBIN reviewed the history of energy efficient policies
leading to SB 17. She related that a goal of House Bill 306
[Chapter 82 SLA 2010] and the Alaska Sustainable Energy Act (AS
44.42.067) was for 25 percent of public facilities [10,000
square feet and larger] to be retrofitted to meet energy goals.
The state achieved that goal in 2014.
2:16:01 PM
MS. TOBIN pointed to the graphic on slide 4 that offers an
overview of energy service performance contracting. Under SB 17,
the Alaska Energy Authority (AEA) or DOT&PF will perform a
public facility audit to identify retrofit projects that would
result in energy cost savings. The agency would hire an energy
service performance company (ESCO) to perform an investment
grade audit to guarantee those savings. The agency then will
identify a third party lender to fund the retrofit projects. The
realized savings will repay the loan and potentially result in
real time savings.
MS. TOBINS reviewed the savings realized from energy retrofits
bulleted on slide 5. She related that energy retrofits of more
than 75 public facilities 10,000 square feet and larger have
resulted in [more than $30 million] in real savings. SB 17
models New Mexico's program that authorized the New Mexico
Finance Authority to bundle small projects to achieve economies
of scale and take advantage of low interest rates and the tax-
exempt bond market for financing.
2:17:40 PM
MS. TOBIN paraphrased the following sectional analysis for SB
17, version B.
Section 1. Establishes legislative intent to outfit
public buildings, facilities, and schools with new
energy upgrades to ultimately reduce net energy costs
by 2026.
Section 2. Amends AS 18.56 by adding a section, AS
18.56.865, authorizing the Alaska Energy Authority
(AEA) to conduct energy audits of public facilities
upon request.
Section 3. Amends AS 42.45.110 by adding a new
subsection permitting owners of public facilities that
use power cost equalization to allow the AEA, the
Alaska Housing Finance Corporation, or the Department
of Transportation and Public Facilities (DOT&PF) to
perform energy audits and retrofits.
Section 4. Amending AS 44.42.065 by adding public
school buildings to the list of community facilities
that the DOT&PF must perform energy audits for every 7
years.
Section 5. Amends AS 44.42.06 by including the
definition of public school as defined by AS
14.25.220, but not including a charter school as
defined by AS 14.03.290.
Section 6. Amends AS 44.42.065 by adding a new
subsection which authorizes the DOT&PF to coordinate
with the AEA to conduct energy audits by request.
2:19:28 PM
Section 7. Amends the date under AS 44.42.067 to which
DOT&PF shall retrofit at least 25% of all public
facilities to no later than January 1, 2026.
Section 8. Amends AS 44.42.067 to include education
facilities as well as government and public use
facilities in the definition of public facilities and
reduces the square foot requirement to 5,000 for
public use facilities.
Section 9. Adds a new section under AS 44.83, AS
44.83.088 which directs the Alaska Industrial
Development and Export Authority (AIDEA) to coordinate
with DOT&PF for energy audits on public facilities
that use power cost equalization as defined by AS
42.45.110(b). Directs AEA to perform these audits at
least once every seven years. Allows the AEA to work
with entities that own public facilities to identify
sources of funding for audits or retrofits.
Section 10. Amends AS 44.88 by inserting a new
section, AS 44.88.179, which directs the AIDEA to
establish a rapid economic recovery office to
facilitate state energy policy and encourage private
investment. Directs this new office of rapid economic
recovery to review energy audits, identify energy
retrofit projects to be bundled, market bundled
projects, and engage with DOT&PF to support with the
contracting of private investors.
Section 11. Adds a new subsection under AS 44.99.115
which establishes a state energy policy target date of
2026 to have at least 50 percent of total energy used
by the state to come from clean energy sources and
authorizes the AEA to request periodic updates from
state facilities on the estimated percent of total
energy used obtained from renewable energy sources.
This section also includes the previously used
definitions of renewable energy, power cost
equalization and a state-funded public facility which
includes a public school building but excludes a
charter school.
2:22:03 PM
CHAIR COSTELLO asked if the facility must be involved with the
Power Cost Equalization (PCE) program.
SENATOR BEGICH answered no. The bill qualifies school district
buildings of 5,000 square feet or larger and community or public
buildings that are receiving PCE and are 5,000 square feet or
larger. The existing statute identifies facilities of 10,000
square feet or larger.
CHAIR COSTELLO asked if there was a reason for excluding charter
schools from participation.
SENATOR BEGICH explained that Legislative Legal Services opined
that charter schools are excluded because the constitution
prohibits the use of public funds for private institutions and
charter schools may receive money from private entities. He
noted that the same law excludes private schools from
participation.
CHAIR COSTELLO asked for confirmation that the public charter
schools in Anchorage would not qualify for the program.
SENATOR BEGICH restated his understanding that charter schools
are able to receive private funds, which disqualifies them from
participation in this program. He noted that the requirement for
the building to be 5,000 square foot or larger would also be a
limitation. He offered to get a memo from Legislative Legal
Services confirming the foregoing and to look for creative
solutions to legally include public charter schools if any meet
the size limitation.
CHAIR COSTELLO moved to invited testimony.
2:24:37 PM
AMBER MCDONOUGH, Business Development Manager - Pacific Zone,
Siemens Industry, Inc., Energy Performance & Services,
Anchorage, Alaska, paraphrased her written testimony that read
as follows:
[Original punctuation provided.]
1. Greetings Madam Chair and members of the committee,
for the record, my name is Amber McDonough. I am based
in Anchorage and am representing Siemens Industry,
Inc. I appreciate the opportunity to provide testimony
on SB-17 at the invitation of Senator Begich's Office.
2. Background Info:
a. I'm an Account Executive for Siemens Industry
Inc., Energy & Performance Services; I've been
with Siemens 22 years and supported their energy
service company (ESCO) business in AK for 13
years. During this time we have implemented
approx. $40M of energy saving performance
contracts (ESPC) in Alaska.
b. An ESCO is a company like Siemens that
develops and implements ESPC work. This includes
energy efficiency projects as well as distributed
energy solutions including renewable power,
energy storage and microgrids.
c. An ESPC is at its core a procurement vehicle
to fund facility & infrastructure improvements
whose savings pay for themselves over time; ESPCs
are designed to be budget neutral where the costs
of design, development, construction, financing,
and the savings guarantee are all funded by
energy & operational savings.
d. Guaranteed annual savings are confirmed each
year using a formal Measurement & Verification
(M&V) Program performed by the ESCO. Should
verified savings not be met the ESCO will pay the
difference to their clients payout rates are
historically less than 1% of all savings
guaranteed.
2:26:20 PM
CHAIR COSTELLO asked if she had experience with this type of
financing in any other state.
MS. MCDONOUGH replied she represents Siemens' business in
Alaska, Hawaii, and Guam and she is part of the Pacific group
that handles this type of service on the coast from California
to Alaska. Siemens Industry provides ESCO services nationally
and internationally.
MS. MCDONOUGH continued her testimony:
3. I reviewed and testified on this bill in February
and was happy to see some of my suggestions
incorporated, especially regarding the type of high-
level preliminary audits (ASHRAE Level 1) prescribed
by this bill. This will allow energy savings
opportunities to be qualified and quantified prior to
engaging the services of an ESCO or incurring the
costs of more detailed "investment grade" audits
needed to secure bank funding.
2:28:21 PM
4. I have three comments on the current version of SB-
17:
a. Sec 3 & 9 of the bill seem to limit the
beneficiaries of this legislation to schools and
facilities that served by utilities that receive
power cost equalization (PCE) payments; Would the
committee consider opening services up to all
communities and public buildings regardless of
their PCE status?
MS. MCDONOUGH noted that Senator Begich clarified that the bill
includes but does not require PCE participation.
b. Sec. 7. AS 44.42.067(a) is amended to read:
(a) Not later than January 1, 2026 [JANUARY 1,
2020], the department shall work with other state
agencies to retrofit at least 25 percent of all
public facilities, starting with those it
determines are the least energy efficient, if the
department determines that retrofitting the
public facilities will result in a net savings in
energy costs to the state within 15 years after
completion of the retrofits for a public facility
and if funding for the retrofits is available.
This is a big "if". Bundling loans or authorizing
a single bond sale which all community facilities
could tap into would address the problem of
trying to secure private investors for rural
communities and rural education attendance area
(REAA) schools; This has been a challenge due to
their lack of tax base and revenue sources needed
guarantee their ability to repay any debt on
their own. If the project bundling is truly
intended to create one larger agreement between
the State of AK and the financier this would be a
big help. For example: I recently investigated
viability of providing a supplemental financing
for a City of Galena microgrid project, but
traditional ESPC lenders felt the community was
too small and the lending risk too great to
participate.
c. Sec. 10. AS 44.88 is amended by adding a new
section to read: Sec. 44.88.179. Rapid economic
recovery office. (a) The authority shall create a
rapid economic recovery office to facilitate the
state energy policy described in AS 44.99.115(b)
and encourage private investment in energy
upgrades at state facilities and public schools.
What's the best way to do that efficiently?
Lately the biggest challenge seems to be
perceived risk, even with the more common ESPC
projects for state agencies. For example during a
typical ESPC development for a state agency
process:
i. The technical viability of Agency ESPC
projects are jointly developed by the DOT&PF
Energy Office Project Managers, the Agency
Facility Managers and the ESCO, but each
agency's financial Administrative Services
Director (ASD) director must ultimately
rd
agree to sign off on 3 party loan. [Current
State ESPC financing requires 4 signatures
in the OMB approval process: DOT&PF Project
Manager, client department leader (Agency
ASD or Commissioner), Dept. of Revenue, and
OMB Director]
ii. The individual Agency Finance Director
must be educated on how ESPC works and
accept the metrics of the ESCO's savings
guarantee. However, beyond that that they
must also weigh the risk of whether or not
the State will continue to fund their
facility's utility budget at the same level
for the term of the repayment period.
iii. This has sometimes been a tough sell
with the Finance Director putting the go/no
go decision responsibility back on the
Facility Manager who may then hesitate to
approve the much needed upgrades.
2:31:30 PM
iv. One solution would be for this bill to
provide authorization for State OMB to
secure a large bond (say $200M) or set aside
a state-wide appropriation budget to fund
these future improvements. This would
achieve structural efficiencies such as:
1. Paper work reduction fewer individual
loan contracts and legal fees would be
required for each ESPC project; perhaps
AIDEA/AEA could manage smaller in-state
intra-agency or public community loans
from the larger pot of secured funding?
2. Lower anticipated interest rates - one
rd
larger transaction with a 3 party
lender would result in better value
than lots of smaller loans with
entities of varying credit ratings.
3. Lower perceived risk this funding
would provide a backstop the State's
current ESPC program as well as give
public Finance Directors, School
Superintendents, and Facility Mangers
in these smaller PCE communities the
confidence they need to tap into these
programs. This would also mitigate the
individual organization's repayment
risk for private lenders.
2:32:52 PM
CHAIR COSTELLO asked the sponsor if he would like to respond to
the testimony.
2:33:02 PM
SENATOR BEGICH answered yes. He said his office talked about
what to do with risk. He noted that a Governor's bill that the
committee heard last week has a section about building bonding
capacity. Conversations on how to combine the approaches are
ongoing. With regard to the "if" clause in bill Section 7, he
said that can be fixed. He said the previous committee of
referral raised the question about the PCE requirement and he
agrees that the provision needs clarification. He said he did
not believe the bill prohibits any public or community school
buildings larger than 5,000 square feet. The intention is to
include PCE funded community buildings because of the direct
state-funding connection. He believes that Ms. McDonough was
focused on ensuring there are enough projects to bundle to make
the financing cost effective. He voiced support for that concept
and noted that some of the concepts in SB 17 are addressed more
broadly in the Governor's energy independence bill. He offered
to work with the committee to mesh the concepts.
CHAIR COSTELLO thanked the sponsor and Ms. McDonough.
2:35:12 PM
CHRISTOPHER HODGIN, Energy Program Manager, Statewide Public
Facilities, Division of Facility Services, Department of
Transportation & Public Facilities, Anchorage, Alaska, stated
that he did not have prepared testimony but he was available to
answer questions.
2:35:30 PM
CHAIR COSTELLO asked if the administration had a position on SB
17.
MR. HODGIN replied the administration supports the concepts
discussed in the legislation.
2:36:17 PM
CHAIR COSTELLO opened public testimony on SB 17; finding none,
she closed public testimony.
CHAIR COSTELLO stated her intention to hold SB 17 for further
consideration. She asked the sponsor if he had any closing
comments.
SENATOR BEGICH highlighted that Sydney Lindeman provided written
testimony and copies were in the packets. He said he looks
forward to working with the committee staff, and the
administration to move the concepts forward in a well-crafted
bill.
SENATOR MICCICHE asked if he talked to AEA about absorbing
positions without a fiscal note on the plan. He noted that his
support for the bill might hinge on the response.
CHAIR COSTELLO asked Mr. Thayer to respond to Senator Micciche.
2:38:15 PM
CURTIS THAYER, Executive Director, Alaska Energy Authority,
Anchorage, Alaska, advised that AEA's fiscal note identified two
new range 16 to 18 analysist positions to monitor the PCE
communities in addition to the work in rural Alaska. He said he
understands Senator Micciche's position; he too does not want to
grow government but in this instance, AEA would need the
positions to complete the audits called for in the bill.
SENATOR BEGICH said he looks at it as an investment that will
save money over time like putting new windows in a building. He
noted that the state saved $40 million in the last decade under
the existing law for buildings 10,000 square foot or greater.
That is a quantifiable savings and he anticipates similar levels
of savings with SB 17. The ESCOs guarantee that. He said he
looks forward to working with the committee staff and the
administration to identify the appropriate process to
potentially save tens of millions of dollars more than the cost
of the legislation in the long run.
[CHAIR COSTELLO held SB 17 in committee.]