04/27/2005 01:30 PM Senate COMMUNITY & REGIONAL AFFAIRS

            SB 188-BULK FUEL REVOLVING LOAN FUND CAP                                                                        
                                                                                                                                
1:58:23 PM                                                                                                                    
                                                                                                                                
SENATOR   DONALD   OLSON,  Sponsor,   paraphrased   the   sponsor                                                               
statement:                                                                                                                      
                                                                                                                                
     I introduced  SB 188 at  the urging of  members of  the                                                                    
     Governor's Rural Energy  Action Council. The  council's                                                                    
     April 15 report has many recommendations to help  rural                                                                    
     communities  contend  with  rapidly  escalating  energy                                                                    
     costs.                                                                                                                     
                                                                                                                                
     SB  188  is  one  of  their  recommendations  that,  if                                                                    
     enacted this session, will allow communities to  offset                                                                    
     rising  fuel   costs  with  large  purchase   economies                                                                    
     achieved through  the bulk fuel  loan program. This  is                                                                    
     particularly of concern for those communities that  are                                                                    
     ice bound during the  winter and depend on just one  or                                                                    
     two large shipments to supply their fuel needs  for the                                                                    
     entire year.                                                                                                               
                                                                                                                                
     Currently, the  bulk fuel  loan program  has a  maximum                                                                    
     loan of $300,000  that any one  borrower may take in  a                                                                    
     fiscal year.  The effect  of this cap  during times  of                                                                    
     high fuel  prices is  to reduce the  maximum amount  of                                                                    
     fuel that  may be purchased.  The bill will  counteract                                                                    
     this  effect by  increasing  the cap  to  $650,000  for                                                                    
     cooperative  organizations  that  are  purchasing  bulk                                                                    
      fuel for more than one community. The larger purchase                                                                     
      for multiple communities should result in a lower per                                                                     
     unit price for all users.                                                                                                  
                                                                                                                                
        The enactment of SB 188 will directly affect this                                                                       
       fall's bulk fuel purchase for most of rural Alaska.                                                                      
     The bill is timely and needed.                                                                                             
                                                                                                                                
2:01:39 PM                                                                                                                    
                                                                                                                                
CHAIR GARY STEVENS asked for a motion to adopt the CS.                                                                          
                                                                                                                                
SENATOR WAGONER  motioned to  adopt CSSB  188 \F  version as  the                                                               
working document. There being no objection, it was so ordered.                                                                  
                                                                                                                                
SENATOR OLSON  explained there are  two significant changes  from                                                               
the original bill.                                                                                                              
                                                                                                                                
  1. It includes electric utility cooperatives as a cooperative                                                                 
     corporation that may use the loan fund for multiple                                                                        
     community fuel purchases.                                                                                                  
  2. It provides a more flexible loan cap increase for multiple                                                                 
     community  fuel  purchases   -  "may  not  exceed   $300,000                                                               
     multiplied by the number of communities on whose behalf  the                                                               
     bulk fuel  is to be purchased,  or $1,000,000, whichever  is                                                               
     greater;"                                                                                                                  
                                                                                                                                
2:03:49 PM                                                                                                                    
                                                                                                                                
SENATOR  BERT   STEDMAN  asked  if  the   CS  is  applicable   to                                                               
communities with good credit.                                                                                                   
                                                                                                                                
SENATOR OLSON  replied that's true;  communities that place  high                                                               
regard on  bill paying  and good  credit should  be rewarded  and                                                               
should be able to  get needed fuel. Without this cap  communities                                                               
will run short of fuel during the winter and it would need  to be                                                               
flown  in, which  would boost  fuel costs  dramatically. He  said                                                               
it's imperative to give  communities the benefit of the doubt  so                                                               
they won't run short during the winter.                                                                                         
                                                                                                                                
NELS  ANDERSON,  Dillingham resident,  testified  that  the  bill                                                               
would  help cooperative  purchasing, which  is  a goal  REAC  has                                                               
established. Legislation  that helps  to bring down  the cost  of                                                               
fuel for small communities across the state is  good legislation.                                                               
He encouraged members to support CSSB 188.                                                                                      
                                                                                                                                
2:07:18 PM                                                                                                                    
                                                                                                                                
JIM MCMILLAN, Deputy  Director of Credit & Business  Development,                                                               
Alaska  Industrial Development and  Export  Authority and  Alaska                                                               
Energy  (AIDEA)  and  Alaska  Energy  Association  (AEA),  stated                                                               
support for  SB  188. Forming  cooperatives may  help reduce  the                                                               
cost of  bulk fuel  purchases for rural  communities. The  change                                                               
will  allow a  borrower that  is a  cooperative formed  under  AS                                                               
10.15  or an  electric cooperative  organized under  AS 10.25  to                                                               
borrow more than  the current $300,000 limit.  This is a step  in                                                               
the right direction, he said.                                                                                                   
                                                                                                                                
CHAIR  GARY STEVENS  noted there  were  no questions  or  further                                                               
testimony. He asked for a motion.                                                                                               
                                                                                                                                
SENATOR WAGONER  motioned to  report CSSB  188(CRA), \F  version,                                                               
and  attached  fiscal   notes  from  committee  with   individual                                                               
recommendations. There being no objection, it was so ordered.