Legislature(2011 - 2012)BARNES 124
03/29/2012 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB357 | |
| HB323 | |
| HB336 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 357 | TELECONFERENCED | |
| += | HB 323 | TELECONFERENCED | |
| += | HB 336 | TELECONFERENCED | |
HB 357-AIDEA SUSTAINABLE ENERGY PROGRAM
3:12:18 PM
CO-CHAIR FOSTER announced that the first order of business would
be HOUSE BILL NO. 357, "An Act establishing the sustainable
energy transmission and supply development program in the Alaska
Industrial Development and Export Authority."
[Although the proposed CS for HB 357 was identified as Version
I, Version M was adopted during the hearing on 3/13/12, and was
before the committee.]
3:12:27 PM
REPRESENTATIVE LANCE PRUITT, Alaska State Legislature, explained
that today's hearing was a continuation of the discussion on HB
357, which expands the power of the Alaska Industrial
Development and Export Authority (AIDEA) to facilitate the
financing of energy projects through a new fund within AIDEA
known as the sustainable energy transmission and supply
development (SETS) fund. Representative Pruitt highlighted five
key components of the bill that grant AIDEA the ability to:
ensure project obligations and guarantee loans or bonds for
projects; defer principal payments and capitalize interest;
offer financing terms up to 30 years for energy projects and 50
years for transmission and hydroelectric (hydro) projects; offer
sales lease-back agreements, build-operate-transfer agreements,
and other agreements to finance energy projects; and offer
reduced interest rates for renewable projects, projects in rural
areas, or projects that promote economic development.
3:14:48 PM
DIRK CRAFT, Staff to Representative Lance Pruitt, Alaska State
Legislature, reminded the committee he had presented a sectional
analysis of the bill at a previous meeting. He pointed out that
HB 357 is a companion bill to SB 25, which empower and create a
new fund within AIDEA that puts a portion of state savings to
work financing the construction and development of energy
projects within Alaska. The bill authorizes AIDEA to facilitate
the financing of energy projects, through which rates would
repay the loans or investments from AIDEA. The agency would
also have the authority to use capital markets to "backfill the
fund" by using loans as an asset, thereby establishing a
perpetual investment vehicle. Thus, 20 years or 30 years from
now, there will be funding available for the replacement of
infrastructure. Mr. Craft stressed that the principal and
interest payments from these funds will remain in-state, as
opposed to the current practice of placing loans out-of-state.
He referred to previous testimony heard by the committee on the
future capital energy needs of Southeast and the Railbelt -
which will cost billions of dollars - and said the intent of the
bill is to fill the financing gap between what the utilities can
bond for, and what is needed. Furthermore, to address concerns
about limitations on financing, he called attention to page 10,
line 22 of the bill which read:
Sec. 44.88.740. Limitations on financing. (a) Unless
the authority has obtained legislative approval by
law, the authority may not finance or participate in
financing of
(1) more than one-third of the capital cost of an
energy project; or
(2) a loan guarantee that exceeds $20,000,000.
(b) Financing under AS 44.88.730 is limited to the
life of an energy project, which may not be more than
(1) 30 years; or
(2) 50 years for a transmission line or
hydroelectric energy projects.
MR. CRAFT explained that this section ensures that a loan
exceeding $20,000,000 requires approval from the legislature.
3:17:00 PM
REPRESENTATIVE TUCK asked whether the loans would be
transferable.
MR. CRAFT deferred to AIDEA. In further response to
Representative Tuck, he said the loans are intended for any
transmission and energy projects.
REPRESENTATIVE PRUITT added that energy projects are defined on
page 11, line 3 of the bill.
MR. CRAFT advised that a new proposed CS with changes to this
section will be provided to the committee.
REPRESENTATIVE PETERSEN asked whether the bill sets the interest
rates for the loans.
MR. CRAFT said beginning on page 6, line 14 of the bill,
sections 8 through 12 set the interest rates for AIDEA, and
define the different sources of revenue available to finance
projects. The proposed legislation clarifies that the interest
rate applies to the fund being created. In further response to
Representative Petersen, he confirmed that the fund is self-
sustaining in that when loans are paid back, more principal
becomes available to make additional loans.
3:20:21 PM
MARK DAVIS, Deputy Director, Investment Finance & Analysis,
Alaska Industrial Development & Export Authority (AIDEA),
Department of Commerce, Community & Economic Development
(DCCED), stated the bill creates an energy infrastructure bank
within AIDEA. He explained that AIDEA does not currently make
direct loans, and in fact, the bill does more than authorize
AIDEA to make loans. At this time, AIDEA operates the
enterprise development fund which is used for loan participation
with banks and for development projects. However, the proposed
bill creates a new fund separate from the enterprise development
fund for energy projects, and the new fund will make loans,
raise money through bonds, and issue loan and bond guarantees.
In addition, there are special powers to defer interest
payments, to capitalize interest, and to allow for a project to
"cash flow over time." Mr. Davis gave the example of the DeLong
Mountain Transportation System (DMTS), saying that large
projects need time to develop, hence the term "patient capital."
He further explained the bill allows for money from a state
savings account to be transferred to AIDEA and used for energy
projects by way of loans, bonds, and guarantees in order to work
with a private partner. For example, a private utility could
issue a bond and AIDEA could guarantee that the bond is for a
public project, making it a tax-exempt bond, and improving the
debt financing for the project. Thus the project is financed by
the same vehicle, but the debt service is substantially lowered.
He assured the committee that AIDEA would continue to work with
the Alaska Energy Authority (AEA), DCCED, to coordinate projects
in rural Alaska. Mr. Davis stressed that AIDEA does not intend
to delve into the energy business, but to lower the cost of
energy projects that is usually passed along to the ratepayers.
3:24:32 PM
CO-CHAIR FOSTER opened public testimony.
3:24:50 PM
DON KUBLEY, Representative, Alaska Independent Power Producers
Association (AIPPA), informed the committee he was a sixth
generation Alaska resident. He expressed his support of HB 357,
and said AIPPA is a newly-formed energy advocacy organization
dedicated to encouraging private investment in capital to assist
Alaska achieve its renewable energy resource goals and provide
competitive-priced power for residents. Further, AIPPA consists
of Alaska's leading independent power producers and developers
from all over Alaska and who are interested in geothermal, wind,
biomass, hydrokinetic, and hydropower developments. Some of its
members are Cook Inlet Region, Inc. (CIRI), Delta Wind Farm,
Alaska Power and Telephone (AP&T), Kootznoowoo, Juneau
Hydropower, Inc., and polarconsult alaska, inc., all of whom
dream of making stranded renewable energy resources available to
Alaska and the U.S. He spoke of removing barriers to a new
industry that will bring jobs, a tax-base, and economic well-
being to the state, and of AIPPA's efforts to encourage private
investment in Alaska's energy infrastructure. Mr. Kubley
recalled that the original plan for the Four Dam Pool
[hydroelectric facilities built by the state in the 1980s]
envisioned a grid from Metlakatla to Skagway providing clean
energy to Southeast residents, and by way of a 30-mile
extension, to the Canada grid in British Columbia (B.C.). This
grid would be a green pipeline sending clean power to B.C. and
all of the villages and communities of Southeast, providing
power for local manufacturing. Although finishing the grid
would be expensive, it would be worth it. Mr. Kubley restated
his strong support of the legislation.
3:29:38 PM
JODI MITCHELL, CEO/General Manager, Inside Passage Electric
Cooperative (IPEC), said IPEC is a nonprofit member-owned
utility serving 1,300 members in the small communities of
Angoon, Hoonah, Kake, Klukwan, and the upper Chilkat Valley.
Her cooperative is almost entirely dependent on diesel
generation and she spoke in support of the bill. Ms. Mitchell
observed grant funding is necessary in rural Alaska to avoid
expensive financing that could result in a hydro project with
rates higher than diesel. Thus IPEC pursues grant funding
through the AEA renewable energy fund. However, a loan program
to provide "gap funding" will be needed for monies needed in
excess of grants. At this time, IPEC has loans through the
Rural Utilities Service (RUS), U.S. Department of Agriculture
for $5.3 million; however, her organization would prefer to
repay a loan to the state rather than to the federal government.
Ms. Mitchell suggested the legislation should also allow
utilities to refinance federal loans with state loans.
3:32:28 PM
DUFF MITCHELL, Vice President & Business Manager, Juneau
Hydropower Inc., disclosed he was also a member of AIPPA. Mr.
Mitchell expressed his support of HB 357, saying it is a great
vehicle to advance the goals of the state energy policy. He
explained that infrastructure investments pay dividends in three
ways: AIDEA will receive money back from sound loans;
economically feasible infrastructure stabilizes rates for today
and for the future, especially with hydro; and local well-paying
jobs are created. In addition, syndicating loans encourages
outside investors to come and invest in Alaska. In closing, Mr.
Mitchell recommended increasing the appropriation from
$250,000,000 to $500,000,000.
3:36:15 PM
JOE GRIFFITH, General Manager, Matanuska Electric Association
(MEA); CEO, Alaska Railbelt Cooperative Transmission & Electric
Company (ARCTEC), stated MEA serves 57,000 members from Eagle
River to Petersville, and ARCTEC is a generation and
transmission cooperative that provides interregional energy
solutions to utilities through cooperative actions. He agreed
with some of the previous speakers and staff on reasons for the
bill, adding that the costs of electrical infrastructure -
although critically needed - are staggering throughout the
state. In fact, $6,000,000,000 will be required in the
Railbelt, exclusive of the distribution utilities. Currently,
consumers are financially stressed by fuel costs, which are
driving businesses out of the state. Mr. Griffith opined that
HB 357 will reduce the impact of the cost of capital
improvements, provide a reasonable method of financing, keep
money in the state, create jobs, and reduce costs to consumers.
Mr. Griffith agreed that the appropriation should be increased
to $500,000,000, and the limitation on financing - which
requires a project of $20,000,000 to be approved by the
legislature - should be increased to $50,000,000 to avoid
delays.
3:40:05 PM
CO-CHAIR FOSTER, after determining that no one else wished to
testify, closed public testimony. He asked whether the bill
allows for the refinancing of federal loans.
MR. CRAFT deferred to the sponsor of the companion bill.
REPRESENTATIVE PETERSEN pointed out a clause in the bill allows
for repurchase and leaseback, which may be a way for AIDEA to
lower the interest rates on existing projects.
CO-CHAIR FOSTER asked how the amount of the $250,000,000
appropriation was decided.
3:42:43 PM
MR. CRAFT said, "... they thought this would be an easier number
to get through [because] right now there is an urgency, that
we're at unprecedented interest rates right now ... right now is
the ideal time to get something like this in place."
3:43:25 PM
CO-CHAIR FOSTER held over HB 357.
The committee took a brief at-ease.
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