Legislature(2009 - 2010)
04/13/2010 09:46 AM House FIN
| Audio | Topic |
|---|---|
| Start | |
| HCR21 | |
| SB217 | |
| SB300 | |
| SB247 | |
| SB248 | |
| SB301 | |
| HB426 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 301
"An Act relating to the power project fund;
authorizing the Alaska Energy Authority to charge and
collect fees relating to the power project fund;
authorizing the Alaska Energy Authority to sell and
authorizing the Alaska Industrial Development and
Export Authority to purchase loans of the power
project fund; providing legislative approval for the
sale and purchase of loans of the power project fund
under the memorandum of understanding dated February
17, 2010; and providing for an effective date."
1:42:41 PM
SARAH FISHER-GOAD, DEPUTY DIRECTOR OF OPERATIONS, ALASKA
ENERGY AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT, introduced the legislation. She
explained that SB 201 is an act related to the power
project fund that allows the Alaska Energy Authority (AEA)
to sell loans from the power project fund to the Alaska
Industrial Development and Export Authority, (AIDEA).It also
authorizes AEA to charge and collect fees relating to the
power project fund. Currently, AEA does not charge
application or origination fees. AEA would like to
establish an appropriate fee schedule through regulations
and a public process.
Ms. Fisher-Goad expounded that the power project fund is an
AEA revolving fund that is primarily used by smaller
utilities for energy projects. The fund has diminished
recently because of increased demand to fund alternative
energy projects. The AIDEA purchase of the power project
fund loan portfolio would re-capitalize the power project
fund with additional funds of approximately $21.6 million.
Ms. Fisher-Goad concluded that the loan purchase is a way
to re-capitalize the power project fund without the use of
general funds.
1:45:53 PM
Representative Doogan queried what the interest rate was on
the loans. Ms. Fisher-Goad replied that the statutory rate
was the municipal tax exempt rate that varies based on
revenue bonds that are currently 5.23 percent. She noted
that AEA has the statutory authority to make adjustments to
the rate and decrease the interest rate lower that the
revenue bond rate.
Representative Austerman asked how much money is currently
in the revolving loan fund. Ms. Fisher-Goad answered that
the cash value was slightly above $5 million on February
28, 2010.
Co-Chair Stoltze opened public testimony.
Co-Chair Stoltze closed public testimony.
Vice-Chair Thomas MOVED to ADOPT Amendment 1, (26-
GS2974\A.1, Kane, 4/12/10):
Page 1, line 6, following "2010;":
Insert "providing legislative approval for a loan
from the power project fund for the Reynolds Creek
hydroelectric project;"
Page 3, following line 11:
Insert a new bill section to read:
"*Sec. 6. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LESISLATIVE APPROVAL OF LOAN FROM THE POWER
PROJECT FUND. Provided the Alaska Energy Authority
approves a loan for the Reynolds Creek hydroelectric
project, the legislature authorizes the Alaska Energy
Authority to loan $9,000,000 from the power project
fund (AS 42.45.010) for the Reynolds Creek
hydroelectric project. This section constitutes
legislative approval under AS 42.45.010(j) for a loan
from the fund that exceeds $5,000,000."
Renumber the following bill sections accordingly.
Co-Chair Stoltze OBJECTED.
Ms. Fisher-Goad explained that amendment number one
provides for project approval for the Reynolds Creek
hydroelectric project. A loan exceeding $5,000,000 from the
fund requires legislative approval.
Representative Doogan asked if the $5 million approval was
exclusively for loan funds or a combination of loan and
grant funds. Ms. Fisher-Goad answered that whether the
funding is comprised of all loans or a combination of loans
and grants legislative approval is needed for a project if
the funds exceed $5 million.
1:50:56 PM
Representative Kelly asked if the approval for the Reynolds
Creek Hydroelectric project interferes in any way with the
credit approval process for the loan. Ms. Fisher-Goad
replied that it does not. The project is pending AEA
approval.
Representative Kelly asked where the project is located.
Vice-Chair Thomas answered that the project is located in
Hydaburg on Prince of Wales Island. He noted that Alaska
Power and Telephone and Haida Corporation has been working
on the project together for several years.
Representative Kelly wondered how close the project was to
being ready or were other projects being displaced by this
approval. Ms. Fisher-Goad replied that there is one other
pending application located in St George. She believed that
there will be enough money in the fund for these and other
potential projects.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
further OBJECTION, Amendment 1 was ADOPTED.
1:54:00 PM
Representative Austerman asked for clarification of the
approximately $20.6 million loan purchase by AIDEA for
AEA's [outstanding] power project fund loans as described
in the fiscal notes [FN3 CED, FN3 CED]. Ms. Fisher-Goad
responded that the estimated $20.6 million represents a
discounted amount based upon the future cash flow of the
loan payments. The discount rate was established based upon
AIDEA's investment rate [return on investments for a three
year period ending September 30, 2009]. She noted that the
list of loans is included with the "Memorandum of
Understanding" ["Exhibit A"] (copies on file).
Representative Austerman reiterated that the proceeds from
the loan sale will replenish the power project revolving
loan fund. Ms. Fisher-Goad affirmed. She added that AEA
anticipates increased demand for the power project fund and
might need additional loan funds in the future.
Representative Austerman wondered what the value of the
revolving loan is. Ms. Fisher-Goad responded that the value
of the loan fund is approximately $34 million comprised of
available cash and outstanding loans. Representative
Austerman asked what the amount of the initial
capitalization of the loan fund was. Ms. Fisher-Goad
replied that she did not know.
1:57:07 PM
Vice-Chair Thomas asked if there is a pre-payment penalty
if the borrower has the ability to pay the loan off early.
Ms. Fisher-Goad answered that no, there is not a pre-
payment penalty.
Representative Austerman asked if AIDEA previously bought
down the loan to revitalize the revolving loan. Ms. Fisher-
Goad negated. Representative Austerman wondered if the
revolving loan fund would be able to continue to provide
loans if AIDEA did not buy the loans. Ms. Fisher-Goad
reported that there is a capital budget appropriation in
the Senate version of SB 230 that provides for $10 million
capitalization of the program that would provide funds if
appropriated. That would allow the Reynolds Creek project
and the project in St. George to proceed but would limit
future requests.
Representative Austerman questioned re-capitalizing a
revolving loan fund.
2:00:42 PM
Representative Salmon queried the size of the [Reynolds
Creek] project and how many people would be served.
STEVEN HAAGENSON, EXECUTIVE DIRECTOR, ALASKA ENERGY
AUTHORITY, DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC
DEVELOPMENT, explained that the Haida Energy Company will
sell the power to the local utility, AP&T and will generate
approximately 25 million kilowatt hours of energy and is a
10 megawatt project. It will provide power for the people of
Hydaburg.
Vice-Chair Thomas added that the project will intertie with
two existing hydropower projects and provide power for the
entire Prince of Wales Island population of approximately
3,000 and several mines.
Representative Doogan asked what the effect of the
legislation will have on AIDEA's finances.
TED LEONARD, EXECUTIVE DIRECTOR, ALASKA INDUSTRIAL
DEVELOPMENT AND EXPORT AUTHORITY, DEPARTMENT OF COMMERCE,
COMMUNITY AND ECONOMIC DEVELOPMENT, explained that the $20.6
million purchase price represents $24.7 million worth of the
actual value of the loans at the discounted interest rate of
6.02 percent which is equivalent to the rate of return on
AIDEA's investments for the last three years. He felt that
this was a risk free investment. He believed it was
consistent with AIDEA's mission and increases the
opportunity to develop more alternative energy projects in
the rural areas.
Representative Doogan asked if AIDEA performed and
independent assessment of the loan portfolio. Mr. Leonard
replied that AIDEA assed the loans and the risks.
2:07:33 PM
Representative Austerman asked what the default rate on the
revolving loan was.
Mr. Haagenson answered that only one loan was possibly in
default.
Representative Austerman queried the need for additional
funding for a revolving loan fund. Mr. Haagenson responded
that the funds are fully deployed because the program has
been popular. AEA anticipates increased use of the program
in the future. He stated that HB 306 [page 1, lines 12-
13],["An Act declaring a state energy policy."] [(4) The
power project fund (AS 42.45.010) serve as the main source
of state assistance for energy projects;] stipulates use of
the energy fund as a vehicle to move energy projects
forward. He stated that SB 301 is an effort to re-
capitalize the fund in order to have more funds available.
Representative Kelly asked whether construction of Reynolds
Creek would affect the Power Cost Equalization (PCE) rate.
Ms. Fisher-Goad responded that she was not sure if the PCE
rate will be impacted.
Vice-Chair Thomas interjected that Gustavus, a community in
his district, lowered their energy costs when hydropower
became available which lowered their PCE needs.
Representative Kelly requested annual reports to track if
hydropower is less expensive that diesel.
2:11:41 PM
Representative Fairclough asked if AEA has other revolving
loan funds. Ms. Fisher-Goad reported that the only other
revolving loan fund is the bulk fuel revolving loan
program. The program offers nine month loans for
communities that must purchase their annual supply of fuel
in bulk.
Representative Fairclough asked if AEA adopted regulations,
standards and procedures to make the loans. Ms. Fisher-Goad
replied that yes, there are underwriting procedures for
both loan programs.
Representative Fairclough reiterated Representative
Austerman's concerns about why a revolving loan fund
requires more capitalization. She wondered if the loan and
investment procedures were properly paced in order to
recharge the fund.
Mr. Haagenson restated that the requests for loans are
outstripping the amount of revenue returning to the fund.
Ms. Fisher-Goad added there are two types of assets in the
power project fund; loans receivable and cash. There are
presently more assets in loans receivable than cash. The
plan is to sell the loans receivable to AIDEA to increase
the cash assets to meet increased loan demand.
Representative Fairclough questioned the management intent
of the revolving loan funds. Ms. Fisher-Goad pointed out
that the bulk fuel revolving loan fund was re-capitalized
by the legislature during the special session in 2008.
Representative Fairclough reiterated that she does not
understand how a revolving loan fund can be spent down. She
asked if AIDEA had regulations that would manage the fund
so that the cash assets would not be depleted.
2:16:16 PM
Mr. Haagenson replied the bulk fuel loan funds are based on
short-term loans and easier to manage. The power project
fund has much longer loan periods, up to 20 years.
Representative Kelly asked if AEA is meeting the reserve
requirements for the revolving loan funds. Ms. Fisher-Goad
answered that currently there are no delinquencies.
Representative Kelly acknowledged that the fund "has been
overtaken by success". He questioned the overall health of
the fund. Ms. Fisher-Goad believed the fund was healthy.
Representative Fairclough believed that the fund was not
healthy or managed properly since the fund is not
revolving. She felt the management authority should have
acted more proactively and requested more funding before
the cash assets were drawn down. She asked if AIDEA will
keep the loan fund revolving.
Mr. Leonard answered that AIDEA is strictly buying the loan
portfolio as an investment, and not taking over any role in
management of the fund.
2:20:33 PM
Representative Austerman wondered why AEA is willing to
give up $4 million worth of loan portfolio instead of
recapitalizing through the direct appropriation via the
capital budget (SB 230). Mr. Haagenson shared that the
current route seemed more available than obtaining that
amount of general fund money.
Co-Chair Hawker noted that all of the fiscal notes (FN1
(DOT), FN2 (REV), FN3 (CED), and FN4 (CED)) were zero.
Vice-Chair Thomas MOVED to report SB 301 out of Committee
with individual recommendations and the accompanying fiscal
notes. There being NO OBJECTION, it was so ordered.
SB 301 was REPORTED out of Committee with a "do pass"
recommendation with previously published fiscal notes: FN1
(DOT), FN2 (REV), FN3 (CED), FN4 (CED)
| Document Name | Date/Time | Subjects |
|---|