Legislature(2009 - 2010)BUTROVICH 205
03/13/2009 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB121 | |
| SB31 | |
| SB58 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 58 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 121 | ||
| = | SB 31 | ||
SB 31-GEOTHERMAL ELEC. PROD. TAX CREDIT
3:48:02 PM
CO-CHAIR WIELECHOWSKI announced SB 31 to be up for
consideration.
CO-CHAIR MCGUIRE, sponsor of SB 31, moved to adopt CS for SB 31,
labeled 26-LS0217\D, as the working document. There was no
objection and version D was before the committee.
CO-CHAIR MCGUIRE explained that version D is a result of
testimony from the last meeting. The amount of the production
tax credit to a graduation system that ties the tax credit to
the retail cost of power for a community in Sec. 2(a) was
changed to equal 15 percent of the retail electricity rate for a
given community. The tax credit is a minimum of 2.1 and a
maximum of 5 cents per kWh. She explained that the change ties
the amount of the production tax credit to the cost of power
rather than the power plant capacities or community populations.
It has the advantages of a tiered system without the arbitrary
thresholds. The original bill had a flat rate of 2.1 cents per
kWh irrespective of the utility rate in any given community and
population.
Sec. 2(a)(2) was removed; it allowed power producers to claim
the tax credit if they used the electricity they produced for
their own commercial purposes.
CO-CHAIR MCGUIRE said the intent of the bill is to encourage the
production and distribution of electricity to communities that
need it the most. This ensures that the power being incentivized
by the tax credit makes it onto the grid and into the homes of
Alaskans and it addresses the industry concern of power
producers claiming the tax credit by simply selling the
electricity to themselves in a cyclical fashion.
Sec. 2(b) changes the number of years the credit could be
claimed from 4 to 5 years. The concern was that 10 years would
add up to massive subsidies; 4 to 5 years was a middle ground.
They don't have a figure for the amount of the subsidy, because
they don't know what kind of energy production will be
incentivized.
Sec. 2(g) caps the aggregate amount of tax credit plus state
grants at 10 percent of the capital cost of a given project can
be claimed. This prevents over-subsidization of projects that
are eligible for both the production tax credit (PTC) and the
Renewable Energy Fund grants.
Sec. 2(k)(2) changes the definition of "energy producer" so that
independent power producers are not required to obtain a
Certificate of Public Convenience and Necessity from the RCA.
Senator Huggins' concern was that they would be limiting the
eligibility of projects to power plants with the production
capacity of 100 kWh or more.
3:52:54 PM
Sec. 2(k)(3) changes all occurrences of "alternative energy" to
"renewable energy". This is moving toward a more federal
definition of renewables and they want to be sure that the PTC
program reflects the change to renewable energy.
All sections moved the tax credit language from AS 43.98, which
is revenue, taxation and miscellaneous provisions to AS 43.20,
which is revenue and taxation, but under the Alaska Net Income
Tax. This was recommended by the Tax Division because it ensures
that the credit is applicable only against the corporate income
tax and not any other state taxes that might accrue.
3:54:53 PM
MERRA KOHLER, President/CEO, Alaska Village Electric Cooperative
(AVEC), said they are a non-profit electric utility that serves
53 villages. They are also proud to take the lead in the state
to develop renewable energy projects to serve their small
communities. They now have wind projects serving seven
communities. Two more are going on line this year and two or
three more again next year. She supported the intent of this
bill. She pointed out that their most difficult project in the
last couple of years has been a 300 kW project, which consists
of three 100 kW machines. They have achieved as high as a 25-30
percent penetration of renewable energy into their conventional
systems. A project that is 300 kW in size in a remote rural
village costs approximately $4 million - including the control
equipment that is needed to interface with the diesel system.
She said a 5 cent kWh production tax credit over a five-year
period would translate into a total credit of $197,000, a modest
percentage of the total cost of the project. So, she urged them
to keep a 10 cent kWh limit. Otherwise, a lot fewer large
projects would consume a much larger chunk of the production tax
credit.
3:57:53 PM
She also said an immediate effective date would be very
beneficial because of two AVEC projects that will go on line
this year including a small hydro project in Southeast Alaska.
3:58:39 PM
SENATOR STEVENS asked if the January 1 effective date would
delay the starting date for the projects.
MS. KOHLER replied that she didn't think so, but if delaying a
project for three would net another $200,000, they might be
inclined to put it off. They could absorb operating costs from
the system for another three or four years.
CO-CHAIR WIELECHOWSKI said he has concluded that "the 2 cents is
pretty generous; the 5 cents is extremely generous; the 10 cents
was a lot." He and Mr. Fulton tried to figure out what the
subsidy would be for 1 mgW hydro plant and they came up with a
half million dollars a year in tax credit.
TREVOR FULTON, staff to Senator McGuire, added that it depends
on the size of the project, but it could amount to several
millions of dollars.
4:01:51 PM
CHRIS ROSE supported Ms. Kohler's comments on SB 31. He
supported an immediate effective date and suggested middle
ground between 5 and 10 cents.
DAN STICKEL, Petroleum Economist, Department of Revenue, was
available to answer fiscal note questions.
4:03:49 PM
TOM LAKOSH thanked them for adopting the 15 percent that he
recommended. However, he said they made a miscalculation in how
it would be applied and that would cause them to reconsider the
5-cent and 5-year limit.
He explained that what happens when you have a 15 percent of the
retail rate subsidy is that as soon as the renewable energy
comes on line, it lowers the rate at which the utility is
charging for its per kilowatt. So, the rate falls precipitously
immediately. So the second year when the retail rate is
recalculated, the subsidy goes way down, because they are now
taking 15 percent of a much cheaper cost. So this isn't as large
a subsidy as they assume. He advised:
4:06:34 PM
In order to give enough incentive to move to the
renewable resource, you need to have this heavily
front loaded so that because as soon as they produce
cheap energy, their subsidy essentially goes away.
The same situation happens with the five-year recovery period.
Because the utility cost is recalculated every year, the subsidy
goes way down as soon as it comes on line. This is a real
problem, and he suggested upping the limit on capital costs to a
maximum total subsidy of 20 percent, because it's extremely
expensive to develop these projects in rural communities. If
they get the subsidy upfront, companies will be competing with
each other to fully replace the diesel so they can get the full
10 cents the first year.
4:10:04 PM
DOMINIC LEE, CEO, Little Susitna Engineering and Construction
Company, said two kinds of people want to use the tax credit.
The non profits want to sell the credit to somebody else, but
the private for profit companies would like to keep it to reduce
their tax. His private for profit project organization would
like the state to give them longer term, like 10 years, but at
half the rate - 2.5 cents.
4:11:50 PM
Another concern, he said, is their project has funding available
right now, but they will lose the $2.8 billion from their Asian
investor if they can't find money for the $10 million AEA
feasibility study.
CO-CHAIR WIELECHOWSKI closed public testimony.
4:13:01 PM
SENATOR STEVENS asked how many households 100 kW serves.
MR. ROSE replied roughly 100 households.
SENATOR STEVENS said he was concerned that the subsidy only
applies to projects placed into service on or after January 1,
2010. The Kodiak Electrical Association has been planning a wind
project for five years and this summer installed the concrete
foundations for three wind mills on Pillar Mountain and will
install the towers next year. This effective date would make
them miss the opportunity to receive a tax credit by three
months. The credit for Kodiak would amount to $1.2 million. He
said their goal is not to retard the use of wind power, and it
would make sense to change the effective date to July 1.
4:16:44 PM
SENATOR STEVENS moved to change the effective date to July 1,
2009 on page 2, lines 14 and 16. There were no objections and it
was so ordered.
4:18:19 PM
CO-CHAIR MCGUIRE moved to report CS for SB 31, version D as
amended, from committee with individual recommendations and
attached fiscal note(s). There being no objection, CSSB 31(RES)
moved from committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CS for SB 121 (Version W).pdf |
SRES 3/13/2009 3:30:00 PM |
SB 121 |
| CS for SB 121 (W) compared with (P).doc |
SRES 3/13/2009 3:30:00 PM |
SB 121 |
| SB 31 Bill Packet.pdf |
SRES 3/9/2009 3:30:00 PM SRES 3/13/2009 3:30:00 PM |
SB 31 |
| SB 121 Bill Packet.pdf |
SRES 3/9/2009 3:30:00 PM SRES 3/13/2009 3:30:00 PM |
SB 121 |
| SB 31 - Blank CS (Version D).pdf |
SRES 3/13/2009 3:30:00 PM |
SB 31 |
| SB 31 - Explanation of Changes (Version D).doc |
SRES 3/13/2009 3:30:00 PM |
SB 31 |
| SB 58 - Bill Packet.pdf |
SRES 3/13/2009 3:30:00 PM |
SB 58 |