Legislature(2021 - 2022)BELTZ 105 (TSBldg)

02/25/2021 03:30 PM COMMUNITY & REGIONAL AFFAIRS

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 15 OPEN MEETINGS ACT; PENALTY TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
*+ SB 13 OIL AND GAS PROPERTY TAX TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
*+ SB 17 ENERGY EFFICIENCY & POLICY: PUB. BLDGS TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
          SB 17-ENERGY EFFICIENCY & POLICY: PUB. BLDGS                                                                      
                                                                                                                                
3:54:59 PM                                                                                                                    
CHAIR HUGHES 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."                                                                                            
                                                                                                                                
3:56:55 PM                                                                                                                    
SENATOR  TOM BEGICH,  Alaska State  Legislature, Juneau,  Alaska,                                                               
sponsor of SB  17, explained the bill is  about energy efficiency                                                               
and policy of public buildings.                                                                                                 
                                                                                                                                
He  said the  committee members  already know  the first  invited                                                               
testifier, Dr. Sydney  Lienemann. Dr. Lienemann has  a PhD degree                                                               
in chemical physics and has spent  the last decade working at the                                                               
intersection  of  energy,  science,   and  policy.  She  was  the                                                               
legislative  assistant for  clean  energy for  U.S. Senator  Mark                                                               
Begichhis   brotherand   then  led  the  Artic  Energy  Diplomacy                                                               
Program  at the  U.S.  State Department  focusing on  distributed                                                               
energy and affordability.                                                                                                       
                                                                                                                                
SENATOR BEGICH detailed Dr. Lienemann  left her position with the                                                               
U.S. State  Department to serve  as his  chief of staff  for two-                                                               
and-a-half years and  helped developed the legislation  for SB 17                                                               
in a prior  legislature. She currently is the  climate advisor to                                                               
the  City  of  Albuquerque  where she  is  overseeing  an  energy                                                               
service performance contractsimilar  to  what SB 17 refersacross                                                                
50 facilities and over 2  million square feet of police stations,                                                               
libraries, pools, community centers, and office space.                                                                          
                                                                                                                                
He  said the  second invited  testifier, Amber  McDonough, is  an                                                               
account  executive for  energy  and  environmental solutions  for                                                               
Siemens Energy.  She has  a degree  in chemical  engineering from                                                               
the   University  of   Alaska  Fairbanks   and  certified   as  a                                                               
professional engineer.                                                                                                          
                                                                                                                                
He  added  both Dr.  Lienemann  and  Ms. McDonough  will  testify                                                               
specifically  to  the  nature of  the  [energy  service  company]                                                               
(ESCO) portion of the bill.                                                                                                     
                                                                                                                                
3:59:02 PM                                                                                                                    
He explained SB 17  is responding to a lot of  needs in the state                                                               
and in many ways  is an economic recovery bill as  well as a bill                                                               
that continues policy made by the legislature in prior years.                                                                   
                                                                                                                                
He said  the State of Alaska  is responsible for $600  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 and  clean energy not  only makes good  fiscal sense,                                                               
it also  fulfills the legislative  promise of  bringing renewable                                                               
energy to Alaskan communities.                                                                                                  
                                                                                                                                
He  remarked  everyone's own  families  recognize  the impact  of                                                               
storage, energy  facilities, and alternative energies;  all of us                                                               
are looking  for those  alternatives including  Alaska's partners                                                               
in  the   oil  and  gas   industry  and  others  who   have  been                                                               
diversifying the very field.                                                                                                    
                                                                                                                                
He detailed in  2010, the Alaska State Legislature  passed HB 306                                                               
which established  the State's  goal of  obtaining 50  percent of                                                               
its State energy  needs from renewable energy by  2025. With some                                                               
of  the highest  costs of  energy in  the nation,  increasing the                                                               
share  of renewable  electricity  and heat  will  save the  State                                                               
money and help insulate costs from volatility and fuel pricing.                                                                 
                                                                                                                                
SENATOR BEGICH said he has from  time to time talked about energy                                                               
costs,  school districts  in  particular. The  [Matanuska-Susitna                                                               
School  District's]  annual energy  cost  is  around $5  million,                                                               
which is the same cost  for the [Lower Kuskokwim School District]                                                               
with a significantly smaller population;  SB 17 potentially would                                                               
help reduce those cost.                                                                                                         
                                                                                                                                
He detailed in  2010, the Alaska Sustainable Energy  Act also set                                                               
forth a goal of retrofitting  25 percent of the State's buildings                                                               
over  10,000  square feet  for  energy  efficiency by  2020,  but                                                               
successfully achieved that goal 6  years early by 2014; they were                                                               
able to  achieve that energy  savings through public  and private                                                               
partnerships described in the SB 17the exact same process.                                                                      
                                                                                                                                
He said building on the  success 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  (PCE)  program. This  creates  incentives  to                                                               
reform retrofits  four buildings which receive  State support for                                                               
their energy bills, which will  save the State's school districts                                                               
and  the community's  money. However,  single retrofit  projects,                                                               
which is  a lot of  our rural project,  may not be  attractive or                                                               
profitable to  private retrofit enterprises that  were interested                                                               
in the earlier bill.                                                                                                            
                                                                                                                                
4:02:00 PM                                                                                                                    
He   explained  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  through  a process  of grouping  a                                                               
number  of ESCOs  together. This  new office  will review  energy                                                               
audits to  identify, and bundle  retrofit and other  clean energy                                                               
projects for marketing and engagement  with the Alaska Department                                                               
of Transportation and Public  Facilities (DOT&PF) for contracting                                                               
with  private investors.  This will  ensure the  benefits of  the                                                               
State's energy  policy, clean energy, and  energy retrofitting to                                                               
proliferate  into rural  communities, rather  than just  reaching                                                               
the goal through one large Railbelt project.                                                                                    
                                                                                                                                
He  summarized 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.                                                                                                     
                                                                                                                                
CHAIR  HUGHES asked  Senator Begich  and his  staff to  provide a                                                               
sectional analysis for SB 17.                                                                                                   
                                                                                                                                
SENATOR BEGICH  referenced a supporting  document for SB  17 from                                                               
DOT&PF. The department continually  updates its energy efficiency                                                               
programwhich  is  born out  of that very  Actand  they  have gone                                                               
beyond  the 25  percent and  have  a remarkable  story that  they                                                               
hopefully will share via testimony with the committee.                                                                          
                                                                                                                                
4:04:17 PM                                                                                                                    
CONNOR OWENS,  Staff, Senator  Begich, Alaska  State Legislature,                                                               
Juneau,  Alaska,  provided a  sectional  analysis  for SB  17  as                                                               
follows:                                                                                                                        
                                                                                                                                
     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 which                                                                    
     authorizes  the   Alaska  Energy  Authority   (AEA)  to                                                                    
     conduct  energy   audits  of  public   facilities  upon                                                                    
     requests.                                                                                                                  
                                                                                                                                
     Section 3                                                                                                                
     Amends AS  42.45.110 by adding  a new  subsection which                                                                    
     permits  owners of  public  facilities  that use  power                                                                    
     cost equalization under subsection  (b) of this statute                                                                    
     to allow  AEA, the Alaska Housing  Finance Corporation,                                                                    
     or DOT&PF to perform energy audits and retrofits.                                                                          
                                                                                                                                
     Section 4                                                                                                                
     Amends   AS  44.42.065(a)   by  adding   public  school                                                                    
     buildings  to the  list  of  community facilities  that                                                                    
     DOT&PF  must  perform  energy audits  for  every  seven                                                                    
     years.                                                                                                                     
                                                                                                                                
     Section 5                                                                                                                
     Amends AS  44.42.065(c) by including the  definition of                                                                    
     public  school   as  defined  by  AS   14.25.220.  This                                                                    
     definition does not include  charter schools as defined                                                                    
     by AS 14.03.290.                                                                                                           
                                                                                                                                
4:06:57 PM                                                                                                                    
He continued his sectional analysis as follows:                                                                                 
                                                                                                                                
     Section 6                                                                                                                
     Amends AS  44.42.065 by adding  a new  subsection which                                                                    
     authorizes  DOT&PF to  coordinate with  AEA to  conduct                                                                    
     energy audits by request.                                                                                                  
                                                                                                                                
     Section 7                                                                                                                
     Amends the  date under AS 44.42.067(a)  to which DOT&PF                                                                    
     shall  retrofit  at  least 25  percent  of  all  public                                                                    
     facilities to no later than January 1, 2026.                                                                               
                                                                                                                                
     Section 8                                                                                                                
     Amends AS 44.42.067(e)  to include education facilities                                                                    
     in  addition to  government and  public use  facilities                                                                    
     within  the  definition   of  public  facilities.  This                                                                    
     section also  the square  foot requirement  from 10,000                                                                    
     square  feet  to  5,000  square  feet  for  public  use                                                                    
     facilities.                                                                                                                
                                                                                                                                
     Section 9                                                                                                                
     Adds a new  section under AS 44.83,  AS 44.83.088 which                                                                    
     directs  AIDEA to  coordinate  with  DOT&PF for  energy                                                                    
     audits  on  public  facilities   that  use  power  cost                                                                    
     equalization  as  defined   by  AS  44.45.110(b).  This                                                                    
     section  also directs  AEA to  perform these  audits at                                                                    
     least once  every seven  years and  allows 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  AIDEA to  establish a  rapid                                                                    
     economic  recovery office  to  facilitate State  energy                                                                    
     policy and  encourage private investment.  This section                                                                    
     also  directs   this  new  office  of   rapid  economic                                                                    
     recovery  to  review  energy  audits,  identify  energy                                                                    
     retrofit projects  to be bundled, market  these bundled                                                                    
     projects,  and  engage  with DOT&PF  to  contract  with                                                                    
     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   coming  from  clean  energy   sources  and                                                                    
     authorizes AEA  to request periodic updates  from State                                                                    
     facilities  on the  estimated percent  of total  energy                                                                    
     used  obtained  from  clean  energy  sources.  For  the                                                                    
     purpose   of  this   legislation,  this   section  also                                                                    
     includes  definitions of  what is  classified as  clean                                                                    
     energy. This section also  includes the previously used                                                                    
     definitions  of  power   cost  equalization  and  State                                                                    
     funded public  facilities which includes  public school                                                                    
     buildings but excludes charter schools.                                                                                    
                                                                                                                                
4:10:40 PM                                                                                                                    
SENATOR GRAY-JACKSON  asked Senator  Begich if  public facilities                                                               
and  buildings refers  to all  public  facilities throughout  the                                                               
state other than State-owned buildings.                                                                                         
                                                                                                                                
SENATOR  BEGICH  answered  public   buildings  are  State  public                                                               
buildings. Currently  the law has the  retrofitting occurring for                                                               
State  public  buildings, 10,000  square  feet  or greater;  this                                                               
would lower that  threshold to 5,000 square feet  and then expand                                                               
it to include school public buildings.                                                                                          
                                                                                                                                
SENATOR  GRAY-JACKSON asked  Senator Begich  to confirm  the bill                                                               
only applies  to State  facilities and not  to, for  example, the                                                               
Municipality of Anchorage.                                                                                                      
                                                                                                                                
SENATOR BEGICH explained the intent of  the bill is for State and                                                               
school district  buildings, not municipality buildings.  The bill                                                               
does include  buildings that  qualify for the  PCE program.  If a                                                               
building qualified  under PCEwhich   is a State  programit  would                                                               
qualify under SB 17.                                                                                                            
                                                                                                                                
SENATOR GRAY-JACKSON replied she understands now.                                                                               
                                                                                                                                
SENATOR  WILSON  asked  Senator  Begich why  the  bill  does  not                                                               
include charter schools.                                                                                                        
                                                                                                                                
4:12:30 PM                                                                                                                    
SENATOR  BEGICH  answered  he  does   not  know  the  reason  for                                                               
excluding charter  schools. He said  he thinks no  charter school                                                               
fell within  the size of  the 5,000 square foot  footprint. Also,                                                               
some charter schools  are also in private buildings  that are not                                                               
part  of  a State  or  public  building;  however, there  is  the                                                               
possibility for considering charter  schools, but DOT&PF or other                                                               
individuals will  perhaps answer  in more  detail the  reason for                                                               
excluding charter schools.                                                                                                      
                                                                                                                                
CHAIR  HUGHES asked  Mark  Davis with  DOT&PF  to answer  Senator                                                               
Wilson's question.                                                                                                              
                                                                                                                                
4:13:33 PM                                                                                                                    
MARK  DAVIS, Director,  Division of  Facilities Services,  Alaska                                                               
Department  of Transportation  and Public  Facilities, Anchorage,                                                               
Alaska,  replied Christopher  Hodgin  with DOT&PF  is the  person                                                               
that  runs the  program,  and he  is the  best  person to  answer                                                               
Senator Wilson's question.                                                                                                      
                                                                                                                                
4:13:54 PM                                                                                                                    
CHRISTOPHER   HODGIN,  Senior   Project   Manager,  Division   of                                                               
Facilities  Services,  Alaska  Department of  Transportation  and                                                               
Public  Facilities, Anchorage,  Alaska, asked  Senator Wilson  to                                                               
repeat his question regarding charter schools.                                                                                  
                                                                                                                                
SENATOR WILSON asked why SB 17 excludes charter schools.                                                                        
                                                                                                                                
MR. HODGIN  replied he believes the  intent would be to  focus on                                                               
the public  facilities and schools  that receive the  majority of                                                               
funding  from  the  Statepossibly   based on  the  scenario  that                                                               
charter schools do not receive a lot of State funds.                                                                            
                                                                                                                                
4:15:23 PM                                                                                                                    
LOKI  TOBIN, Staff,  Senator  Begich,  Alaska State  Legislature,                                                               
Juneau, Alaska,  explained the Alaska  statute referenced  in the                                                               
sectional analysis  defines public  schools, "that  are supported                                                               
by public  funds," and  that already  includes a  publicly funded                                                               
charter school. SB  17 simply clarifies that the  definition of a                                                               
public facility  does not include  a charter school that  uses or                                                               
receives support from private funds.                                                                                            
                                                                                                                                
CHAIR HUGHES asked  her if there are some charter  schools in the                                                               
state that  solely receive  support by  private funds  and others                                                               
that receive public funds.                                                                                                      
                                                                                                                                
MS. TOBIN answered correct.                                                                                                     
                                                                                                                                
CHAIR HUGHES asked  Ms. Tobin to provide a list  to the committee                                                               
of charter schools and how they breakout.                                                                                       
                                                                                                                                
SENATOR  WILSON  asked  her  if the  bill  excludes  all  charter                                                               
schools or just the privately funded charter schools.                                                                           
                                                                                                                                
MS. TOBIN replied  she will ask the  [Legislative Affairs Agency]                                                               
(LAA)  to clarify.  She  explained,  "The way  that  the bill  is                                                               
intended  to  be  written  is that  this  only  excludes  charter                                                               
schools that use or are supported by private funds."                                                                            
                                                                                                                                
SENATOR  WILSON  noted  he  has  a bit  of  a  concern  regarding                                                               
communities  with set  power costs  where a  major player  like a                                                               
school  uses less  energy, but  the energy  bills for  individual                                                               
ratepayers goes  up to cover  the cost of  decreased utilization.                                                               
He  asked Senator  Begich if  he has  thought about  some of  the                                                               
energy costs  he previously noted.  He said  he does not  mean to                                                               
say  the  State  should  subsidize   the  power  cost,  but  some                                                               
communities have set power costs.                                                                                               
                                                                                                                                
4:18:10 PM                                                                                                                    
SENATOR BEGICH replied for communities  that receive PCE support                                                                
which passes  through to the  home and  in some ways  holds those                                                               
homes harmlesshis   office did understand  there might be  a risk                                                               
and that  is why  the bundling capacity  makes a  difference from                                                               
the ability  to share  the overall  risk, but  there is  also the                                                               
possibility that might happen.                                                                                                  
                                                                                                                                
He said  the overall point  of the bill is  to lower the  cost of                                                               
rural energy. If  indeed there was the  unintended consequence of                                                               
increasing  costswhich  his  office  does  not anticipatebut   if                                                               
that does happen  the legislation would probably  have to provide                                                               
some other level of intervention  with those communities. That is                                                               
something  not yet  known, but  his office  has taken  the things                                                               
Senator Wilson  mentioned into consideration  in the  drafting of                                                               
the bill and is one of the things his office is watching.                                                                       
                                                                                                                                
He explained if the bill "were  to get legs and move," his office                                                               
would  get  further  clarification  from  DOT&PF  and  the  other                                                               
entities  involved. However,  Senator  Wilson asked  a very  good                                                               
question, one that he was prepared to answer.                                                                                   
                                                                                                                                
CHAIR HUGHES  noted Senator Begich's bill  introduction where the                                                               
goal to  retrofit buildings over  10,000 square feet  occurred in                                                               
2014,  6 years  ahead  of time.  She  asked him  if  most of  the                                                               
retrofits occurred  in urban  areas within  the Railbelt,  and if                                                               
the State is starting to see savings from the 2014 retrofits.                                                                   
                                                                                                                                
SENATOR BEGICH answered virtually all  the structures were on the                                                               
Railbelt. He said Mr. Hodgin can provide additional details.                                                                    
                                                                                                                                
4:20:27 PM                                                                                                                    
MR.  HODGIN  detailed  there  have   been  a  lot  of  facilities                                                               
retrofitted in  the urban areas.  The project  executed retrofits                                                               
in  over  75  facilities  since  the  time  of  the  legislation,                                                               
including rural  retrofits in St.  Mary's, Nome, and  Bethel, and                                                               
Southeast  locations   in  Ketchikan,  Sitka,  and   Juneau.  The                                                               
retrofit  program spread  projects around  to different  areas of                                                               
the state.                                                                                                                      
                                                                                                                                
MR.  HODGIN noted  to date,  there  is an  annual energy  savings                                                               
greater than  $4.1 million from the  completed retrofit projects.                                                               
That represents  an investment of  about $40 million  in projects                                                               
and that investment  is from State, federal,  and financed funds.                                                               
The  payback is  about 10  years, so  some of  the projects  have                                                               
already  started completion  of  their financing  terms and  have                                                               
realized some of the savings.                                                                                                   
                                                                                                                                
CHAIR HUGHES noted he mentioned  $40 million in investment from a                                                               
combination of  various fund  sources. She asked  him if  he knew                                                               
what the State's contribution is to the $40 million investment.                                                                 
                                                                                                                                
MR. HODGIN  answered he does  not know and  will get back  to the                                                               
committee.                                                                                                                      
                                                                                                                                
4:22:29 PM                                                                                                                    
SENATOR BEGICH  clarified the largest  State expense in  the ESCO                                                               
processes  via the  staff that  goes out  to conduct  the audits.                                                               
When the audit is complete, the private businesses contracted                                                                   
for  example,  [Siemens Government  Technologies]pay   themselves                                                               
back for their retrofitting investment  with the savings from the                                                               
energy. The  State's outlay  is essentially  in doing  the audits                                                               
and program supervision.                                                                                                        
                                                                                                                                
He noted when Mr. Hodgin  provides the requested information, the                                                               
committee will see the State  investment is relatively minor. The                                                               
savings  earned  comes  from the  partnership  with  the  private                                                               
company, so the  private company recoups its  investment from the                                                               
retrofit  savings. After  the 10  years or  agreed to  [financing                                                               
terms] time, the building just  continues to operate at the lower                                                               
level of energy cost.                                                                                                           
                                                                                                                                
CHAIR  HUGHES asked  him to  explain the  intent language  at the                                                               
bottom of page 1, which states:                                                                                                 
                                                                                                                                
     By   2026,  entry   into  energy   service  performance                                                                    
     contracts  valued at  $100 million  to retrofit  public                                                                    
     facilities, etcetera. Then  at the top of  page 2, line                                                                    
     2,  it  says while  avoiding  an  upfront cost  to  the                                                                    
     State.                                                                                                                     
                                                                                                                                
She  summarized  the  State  is  going to  retrofit  a  bunch  of                                                               
buildings with little  upfront financing cost. She  asked him how                                                               
the program will work and if the State works with AIDEA.                                                                        
                                                                                                                                
SENATOR BEGICH replied the two  invited testifiers, Dr. Lienemann                                                               
and Ms. McDonough, can better layout the program's details.                                                                     
                                                                                                                                
4:24:46 PM                                                                                                                    
CHAIR  HUGHES  announced  the  committee  will  move  to  invited                                                               
testimony for SB 17.                                                                                                            
                                                                                                                                
4:24:57 PM                                                                                                                    
DR.   SYDNEY  LIENEMANN,   Climate  Advisor,   Natural  Resources                                                               
Council, City of Albuquerque, Albuquerque,  New Mexico, noted she                                                               
was  Senator  Begich's chief  of  staff  and  is now  before  the                                                               
committee as a private citizen.                                                                                                 
                                                                                                                                
She said  she has worked  most of her  career looking at  ways to                                                               
improve  the  affordability  and accessibility  of  clean  energy                                                               
including  energy efficiency.  Her  career  started with  writing                                                               
grants  to  study  wind energy  potential  in  Southwest  Alaska,                                                               
eventually leaving  Alaska to  earn her  PhD in  chemical physics                                                               
where  she studied  how  to make  materials  for next  generation                                                               
solar energy. Afterwards,  she worked in the U.S.  Senate and led                                                               
the U.S.  Department of State's  Arctic Energy  Diplomacy program                                                               
which focused on  Alaska rural energy expertise with  the rest of                                                               
the circumpolar north.  Most recently, she worked  for the Alaska                                                               
State Legislature  as the chief  of staff for Senator  Begich and                                                               
is currently the climate advisor  to the City of Albuquerque, New                                                               
Mexico.                                                                                                                         
                                                                                                                                
She said  when she  and Senator Begich's  office first  worked on                                                               
the  legislation and  the first  step was  outlining the  problem                                                               
that  they  wanted  to  solve. Energy  efficiency  is  harder  to                                                               
finance  off  the  Railbelt  because   things  are  smaller,  and                                                               
communities  are more  spread out.  After the  [American Recovery                                                               
and  Reinvestment Act  of  2009], DOT&PF  did  an incredible  job                                                               
retrofitting  buildings  10,000  square  feet  or  greater  using                                                               
performance contract financing which has  saved the State over $4                                                               
million in the last 10 years.                                                                                                   
                                                                                                                                
She  explained  the problem  is  that  there  are  not a  lot  of                                                               
buildings over 10,000 square feet  in rural Alaska. The challenge                                                               
is how  to make  sure models  like performance  contracting where                                                               
there are  no upfront costs to  the State are available  to rural                                                               
Alaska where there  are not the economies of  scale that downtown                                                               
Anchorage or  Juneau have. Cracking  the tough problem  will only                                                               
happen through  significant stakeholder engagement  to understand                                                               
the  unique challengesand   to  Senator  Wilson's pointfit   them                                                               
without raising the cost of energy for everyone else.                                                                           
                                                                                                                                
4:27:13 PM                                                                                                                    
DR. LIENEMANN stated  she will share with the  committee what she                                                               
has  experienced  in  New  Mexico.  New  Mexico  does  have  some                                                               
interesting similarities to Alaska's  rural-urban divide. Like in                                                               
Alaska, most  of New Mexico's  large buildings are within  two or                                                               
three major  population centers,  and ensuring  rural communities                                                               
have access to programs designed to  lower energy costs is a huge                                                               
problem in New  Mexico as well. To address  these challenges, the                                                               
New Mexico State  Legislature created two programs  over the last                                                               
30 years  that resulted in  a thriving energy  efficiency economy                                                               
statewide.  New Mexico  now has  the  largest job  growth in  the                                                               
energy efficiencies  sector in the  country, noting  she believes                                                               
it is largely because of the two programs that are in place.                                                                    
                                                                                                                                
She  detailed the  first  program  was the  creation  of the  New                                                               
Mexico  Finance   Authority  (NMFA)  and  their   public  project                                                               
revolving loan fund used to  finance many rural energy efficiency                                                               
projects  around  the  state. To  incentivize  particularly  low-                                                               
income communities,  New Mexico offers  low or no  interest loans                                                               
for areas with median income below the state average.                                                                           
                                                                                                                                
She explained NMFA  coordinates the financing of  state and local                                                               
infrastructure and  building projects to include  public schools.                                                               
NMFA  looks for  opportunities  to build  economies  of scale  by                                                               
coordinating  between  government  entities. For  example,  if  a                                                               
rural  school  requires  major maintenance,  NMFA  will  identify                                                               
other  scheduled  upgrades  in  that community  and  combine  the                                                               
financing to help with the logistics  of the project, so they can                                                               
bundle multiple projects in one area  or across the state to take                                                               
advantage of  the tax-exempt bond  market to finance  them. Since                                                               
establishment in  1992, NMFA has  made over 1,800  loans totaling                                                               
about $40 billion.                                                                                                              
                                                                                                                                
4:28:55 PM                                                                                                                    
She said the  second thing that the New  Mexico State legislature                                                               
established is  the Public Facility  Energy Efficiency  and Water                                                               
Conservation  program. This  created  a framework  for state  and                                                               
local  governments and  school districts  to  use energy  service                                                               
performance   contracting  to   finance  sustainability   related                                                               
upgrades. This is energy efficiency  and renewable energyfor  New                                                               
Mexico  it   is  always  water  savings   and  water  reclamation                                                               
projects.                                                                                                                       
                                                                                                                                
She  detailed New  Mexico created  template  contracts and  price                                                               
agreements with  contractors to allow local  governments to avoid                                                               
long  [request for  proposal] (RFP)  processes  and get  projects                                                               
scoped, financed, and completed a  lot faster. Since that program                                                               
started about 20 years ago, the  program has resulted in close to                                                               
$100  million  in  energy  efficiency  projects  just  in  public                                                               
facilities including  schools, municipal buildings,  and museums                                                                
noting Albuquerque  recently completed  a project  at one  of its                                                               
jails.                                                                                                                          
                                                                                                                                
DR.  LIENEMANN noted  in her  current position  with the  City of                                                               
Albuquerque,  the  city just  completed  scoping  and selected  a                                                               
contractor for its own energy  service performance contract. Like                                                               
many other government entities, the  City of Albuquerque does not                                                               
have  the  financing to  pay  for  upgrades  up front.  They  are                                                               
financing their projects  over 12 to 15 years,  guaranteed by the                                                               
energy  savings.  The  City  of  Albuquerque  is  doing  over  50                                                               
buildings,  over  2 million  square  feet,  noting she  does  not                                                               
believe  the   program  was   possible  without   the  framework,                                                               
paperwork,  and legal  templates made  available by  New Mexico's                                                               
state program.                                                                                                                  
                                                                                                                                
She   said  she   believes  New   Mexico's   success  in   energy                                                               
efficiencies  stems from  the combination  of a  financing entity                                                               
able to combine  public and private funding, and  the bundling of                                                               
small projects to  take greater advantage of  economies of scale.                                                               
New Mexico also  has the office she serves in  that resulted from                                                               
energy   service   performance   contracting   legislation   that                                                               
identifies  potential  projects  and offers  best  practices  and                                                               
legal  document templates.  That  has made  it  easier for  local                                                               
governments  and   school  district   employees  to   get  energy                                                               
efficiency projects up and going.                                                                                               
                                                                                                                                
She  summarized   she  thinks  the  bill   before  the  committee                                                               
accomplishes the  two goals she  previously noted and  provides a                                                               
framework that will encourage energy efficiency across Alaska.                                                                  
                                                                                                                                
4:31:21 PM                                                                                                                    
CHAIR HUGHES thanked Dr. Lienemann for her invited testimony.                                                                   
                                                                                                                                
SENATOR  BEGICH  asked Dr.  Lienemann  to  address Chair  Hughes'                                                               
question  on how  the savings  occur from  the energy  efficiency                                                               
projects.                                                                                                                       
                                                                                                                                
DR. LIENEMANN  explained energy costs  are going to go  down when                                                               
performing energy  efficiency upgrades,  and energy  cost savings                                                               
are quantifiable.  The State can  use the energy cost  savings to                                                               
guarantee  a loan  to do  the  energy efficiency  upgrades. If  a                                                               
project takes 10  years to payoff a loan, the  State will realize                                                               
the   full  energy   savings.  The   office  proposed   from  the                                                               
legislation would help  to find private or  public financing. The                                                               
State would  not ever see  a cost  increase, there is  no upfront                                                               
cost, and even  the facilities' monthly bill would  go down where                                                               
the State  would have the  best of both  worlds with no  big bill                                                               
due  at the  completion of  energy efficiency  upgrades, and  the                                                               
project payoffs  occur over a  period of time while  energy bills                                                               
go down.                                                                                                                        
                                                                                                                                
4:34:00 PM                                                                                                                    
CHAIR HUGHES  asked her  to confirm the  State would  realize the                                                               
savings after paying off the loan.                                                                                              
                                                                                                                                
DR. LIENEMANN explained the usual  structure of loans would allow                                                               
the  State to  immediately realize  half of  the cost  savings by                                                               
splitting the difference between cost  savings and paying off the                                                               
loan. Once the program pays  off the loanstypically  10-15 years,                                                               
but up  to 25  years in  New Mexicothe   State realizes  the full                                                               
savings from an energy efficient building.                                                                                      
                                                                                                                                
4:35:22 PM                                                                                                                    
AMBER   MCDONOUGH,  Account   ExecutiveEnergy   and   Performance                                                               
Services, Siemens  Industry, Inc.,  Anchorage, Alaska,  noted she                                                               
has  been  developing  energy performance  contracting  work  for                                                               
Siemens  as an  ESCO in  Alaska for  over 12  years. During  that                                                               
time,  Siemens  has  implemented  approximately  $50  million  in                                                               
energy savings performance contracting work.                                                                                    
                                                                                                                                
She   explained  in   its  simplest   form,  an   energy  savings                                                               
performance   contract  allows   facility  owners   to  implement                                                               
improvements by  capturing wasted energy and  operational dollars                                                               
to  pay  for  infrastructure  improvements  over  time.  Under  a                                                               
performance contract  an ESCO  designs, develops,  and constructs                                                               
energy  projects and  guarantees the  savings results  over time.                                                               
Energy  savings performance  contracts  are  budget neutral  with                                                               
very little out  of pocket expense for facility  owners. The ESCO                                                               
typically does  not take out a  loan to pay for  the improvements                                                               
directly,  but instead  helps owners  procure financing  directly                                                               
from third party  lenders to ensure the  lowest possible interest                                                               
rates.                                                                                                                          
                                                                                                                                
She  detailed  a  typical energy  performance  contract  involves                                                               
development  in four  phases: preliminary  assessment, investment                                                               
grade  audit,  project  construction,   and  then  a  performance                                                               
assurance  period  or  savings guarantee  period.  The  State  of                                                               
Alaska requires  a three-year minimum savings  guarantee, but the                                                               
State considers  projects as  cost effective  if the  net project                                                               
pays  for itself  over a  15-year  term. Savings  accrue for  the                                                               
customer  as soon  as construction  starts, during  the repayment                                                               
period,  and  then after  the  repayment  period10  years  or  15                                                               
yearsthe  savings  go directly  to the customer  for the  life of                                                               
the equipment upgrades.                                                                                                         
                                                                                                                                
4:37:33 PM                                                                                                                    
MS. MCDONOUGH  said the design of  SB 17 seems to  encourage more                                                               
energy performance  contracting throughout the  state, especially                                                               
for  rural  communities  and educational  institutions.  However,                                                               
even  for performance  contracting  projects  that make  enormous                                                               
technical  and  economic  sense,   she  has  found  that  project                                                               
financing for  smaller clients  without reliable  revenue streams                                                               
is a challenge.                                                                                                                 
                                                                                                                                
She noted  earlier in February  she requested a credit  check for                                                               
the  City  of  Galenapopulation    of  500for   approximately  $1                                                               
million to  $2 million to complete  a funding gap for  a proposed                                                               
microgrid project. She said the lender  told her the loan for the                                                               
City of Galena was too risky and  too much money for too small of                                                               
a  community, so  she was  unable to  approach the  city with  an                                                               
alternative financing solution.                                                                                                 
                                                                                                                                
She  said   regarding  SB  17,   she  has  a  few   comments  and                                                               
recommendations regarding the bundling  of projects, the types of                                                               
audits used, and the retrofit targets set by the bill.                                                                          
                                                                                                                                
CHAIR  HUGHES  asked  her  to  provide  her  suggestions  to  the                                                               
committee.                                                                                                                      
                                                                                                                                
4:38:50 PM                                                                                                                    
MS. MCDONOUGH  said regarding bundling  projects, SB 17  seems to                                                               
direct AIDEA  to establish  a rapid  economic recovery  office to                                                               
facilitate the review of energy  audits, identify energy retrofit                                                               
projects  for  bundling,  market  the bundled  projects,  and  to                                                               
engage with private investors.                                                                                                  
                                                                                                                                
She said she assumes AIDEA would  use the State to provide energy                                                               
audits, estimate  the amount of construction  funding needed, and                                                               
then  work  to  identify  a   third-party  financier  to  provide                                                               
financing for the total amount of the bundle projects.                                                                          
                                                                                                                                
She  explained  if  her  previous  assumptions  with  SB  17  are                                                               
correct, the legislation would be  helpful by leveraging the good                                                               
credit  of  the   State  of  Alaska,  allows   the  financier  to                                                               
contractually deal  with the  State as  the sole  entity, reduces                                                               
the  risk  of   the  overall  loan,  and   hopefully  provides  a                                                               
[competitive interest rate] to the State.                                                                                       
                                                                                                                                
MS. MCDONOUGH  said the  biggest problem  she sees  with securing                                                               
private  investors for  rural communities,  and especially  rural                                                               
education area  schools, is  their lack of  tax base  and revenue                                                               
that would  guarantee their ability  to repay debt on  their own.                                                               
An agreement between the State  of Alaska and the financier would                                                               
truly be a big help for bundling projects.                                                                                      
                                                                                                                                
She  noted  she  has  run  into challenges  when  trying  to  vet                                                               
financing for  single owners  with a lot  of tenants  under them,                                                               
this was  the case for the  Dimond Shopping Mall and  for the Ted                                                               
Stevens Anchorage  International Airport; these are  places where                                                               
there is a  single owner with a lot of  independent tenants which                                                               
need to  agree on  the improvements  before project  approval and                                                               
financing.                                                                                                                      
                                                                                                                                
She  said she  sees the  project bundling  proposed by  SB 17  as                                                               
being like  her example of  a single owner with  multiple tenants                                                               
where the  State asks  lenders to provide  one loan  for multiple                                                               
projects with different owners.  Bundling consideration for SB 17                                                               
should  include  how  the State  will  downflow  individual  loan                                                               
agreements to each  of the project owners within  the bundle, and                                                               
how the  State will  manage the accounting  and repayment  of the                                                               
loans by individual project owners  that flow back to the primary                                                               
lender.                                                                                                                         
                                                                                                                                
She remarked  when considering solutions to  the project bundling                                                               
questions, she  inquired if  the State  has considered  using the                                                               
Alaska  Housing  Finance  Corporation's  (AHFC)  existing  Alaska                                                               
Energy  Efficiency  Revolving  Loan   Fund  for  issuing  [energy                                                               
performance contracting] loans; one example  of this is that AHFC                                                               
has been previously willing to  consider loans to rural education                                                               
areas at  predetermined interest rates  based on the term  of the                                                               
loans rather than the credit ratings of the individual borrower.                                                                
                                                                                                                                
4:42:08 PM                                                                                                                    
SENATOR  BEGICH asked  her  to  clarify that  the  bill does  not                                                               
adequately specify the nature of how bundling would occur.                                                                      
                                                                                                                                
MS.  MCDONOUGH  answered   correct.  She  said  if   she  were  a                                                               
financier, she  would see  the [current version  of the  bill] as                                                               
bundling  of  projects  but still  having  to  potentially  write                                                               
individual  loan contracts  for each  of the  projects, which  is                                                               
undesirable.                                                                                                                    
                                                                                                                                
SENATOR BEGICH asked if she  would be interested in providing the                                                               
language to help clarify that in  the bill to meet the particular                                                               
goal she suggested.                                                                                                             
                                                                                                                                
MS. MCDONOUGH  answered yes, Siemens has  financial managers that                                                               
would be  willing to  assist in drafting  language that  would be                                                               
more attractive to financiers.                                                                                                  
                                                                                                                                
CHAIR HUGHES asked her if she had any additional comments.                                                                      
                                                                                                                                
4:43:26 PM                                                                                                                    
MS.  MCDONOUGH replied  she  has  a few  comments  on the  audits                                                               
themselves.  The  new legislation  focuses  on  enabling AEA  and                                                               
DOT&PF to  coordinate efforts to  provide energy audits  to rural                                                               
entities in schools. However, the  bill does not define the level                                                               
of  detail required  for  the  energy audits  the  State will  be                                                               
performing.  For example,  the State  should define  the type  of                                                               
audits  performed   via  either  a   feasibility  study[American                                                                
Society   of   Heating,   Refrigerating,   and   Air-Conditioning                                                               
Engineers]  (ASHRAE)  Level  One  energy  audita   more  detailed                                                               
ASHRAE  Level Two  energy  audit, or  a  hybrid style  investment                                                               
grade audit used by ESCOs to develop performance contracts.                                                                     
                                                                                                                                
She  suggested  the  State  confine  its  audits  to  preliminary                                                               
feasibility  studiesqualifier   auditsthat  are  inexpensive  and                                                               
quick   to  perform;   they  could   confirm  potential   savings                                                               
opportunities  for each  facility to  warrant the  expense of  an                                                               
ESCO provided  investment grade audit.  If the State  justifies a                                                               
performance contracting opportunity, an  ESCO would still need to                                                               
do  their own  independent investment  grade audits  if they  are                                                               
going  to  guarantee  project  savings;  this  enables  ESCOs  to                                                               
validate  and agreed  to the  estimated savings  and construction                                                               
costs generated  by the State  delivered auditsthere   will still                                                               
be  that expense  to the  State  even if  the State  does a  more                                                               
detailed audit in advance.                                                                                                      
                                                                                                                                
CHAIR HUGHES asked her what the acronym "ESCO" means.                                                                           
                                                                                                                                
MS.  MCDONOUGH   replied  "ESCO"   stands  for   "energy  service                                                               
company."  ESCOs are  the  types of  companies  that develop  and                                                               
deliver performance contracting  services, deliver and distribute                                                               
energy systems,  provide power purchase agreements  for solar and                                                               
wind, and offer renewable energy solutions.                                                                                     
                                                                                                                                
4:45:20 PM                                                                                                                    
CHAIR HUGHES thanked Ms. McDonough  for her invited testimony and                                                               
asked if she had any final thoughts.                                                                                            
                                                                                                                                
MS.  MCDONOUGH noted  her last  suggestion is  section 7,  energy                                                               
retrofit targets. The target states  that the State will retrofit                                                               
approximately 25 percent  of all public facilities  no later than                                                               
January 1,  2026. She said  her impression is DOT&PF  has already                                                               
achieved the target  and suggested a more  aggressive target like                                                               
50 percent of all facilities by January 1, 2026.                                                                                
                                                                                                                                
CHAIR  HUGHES  asked Senator  Begich  if  he has  identified  the                                                               
number of buildings that the 5,000 square foot target entails.                                                                  
                                                                                                                                
SENATOR BEGICH  replied his  staff assistant  or DOT&PF  might be                                                               
able to answer her question.                                                                                                    
                                                                                                                                
MS. TOBIN replied she does not  have the number that Chair Hughes                                                               
inquired about.                                                                                                                 
                                                                                                                                
MR. HODGIN answered his preliminary  numbers for executive branch                                                               
owned  buildingsnot   including  school  buildingsis   503  State                                                               
facilities that are 5,000 square feet  or greater and the goal is                                                               
to get to the 25 percent target of that 503.                                                                                    
                                                                                                                                
4:47:44 PM                                                                                                                    
CHAIR HUGHES asked him to confirm  that 503 is everything that is                                                               
5,000 square feet or greater and not retrofitted.                                                                               
                                                                                                                                
MR.  HODGIN   replied  DOT&PF   has  executed   approximately  75                                                               
facilities with 18  remaining in State facilities  with the broad                                                               
portfolio of 503 that are 5,000 square feet or greater.                                                                         
                                                                                                                                
CHAIR HUGHES  asked Senator  Begich if  the definition  of "clean                                                               
energy" includes natural gas.                                                                                                   
                                                                                                                                
SENATOR  BEGICH  answered  he believes  the  definition  includes                                                               
natural gas.                                                                                                                    
                                                                                                                                
MS. TOBIN answered  she does not know the  specific definition of                                                               
"natural gas,"  but the definition  of clean energy  includes low                                                               
emission, non-toxic biomass from  solid, liquid, or organic fuel.                                                               
Also, the definition  includes digester gas. She said  she is not                                                               
entirely sure of the specific  definition of "natural gas" within                                                               
the particular definition piecelocated on page 4, lines 19-23.                                                                  
                                                                                                                                
CHAIR HUGHES stated knowing that is important to know.                                                                          
                                                                                                                                
CHAIR  HUGHES asked  the  two executive  directors  from the  two                                                               
entities that  will be  closely involved  if SB  17 were  to pass                                                               
[AIDEA and AEA] to comment on the legislation.                                                                                  
                                                                                                                                
4:50:04 PM                                                                                                                    
ALAN   WEITZNER,   CEO/Executive  Director,   Alaska   Industrial                                                               
Development  and  Export  Authority (AIDEA),  Anchorage,  Alaska,                                                               
noted AIDEA has had a  preliminary discussion with Senator Begich                                                               
and his  staff about SB  17. AIDEA  has asked some  questions and                                                               
things they  want to follow up  on. AIDEA would like  to get more                                                               
definition and  detail from the  testimony of Ms.  McDonough with                                                               
Siemens  to understand  a little  bit more  on the  bundling that                                                               
would possibly impact AIDEA in the bill.                                                                                        
                                                                                                                                
4:50:57 PM                                                                                                                    
CURTIS  THAYER,  Executive   Director,  Alaska  Energy  Authority                                                               
(AEA), Anchorage,  Alaska, noted AEA  has also been  working with                                                               
Senator Begich on some clarification of the bill.                                                                               
                                                                                                                                
He  said  regarding PCE,  the  only  buildings that  qualify  are                                                               
residential homes  up to 550  kilowatts and  community buildings.                                                               
However,  schools, government,  and commercial  buildings do  not                                                               
qualify to receive  PCE. If a community has  a community building                                                               
that is  not a government  facility, then PCE qualifies  for that                                                               
building but not for schools.                                                                                                   
                                                                                                                                
He stated  AEA looks forward  to continuing to work  with Senator                                                               
Begich  on  clarifying AEA's  role,  addressing  what is  already                                                               
ongoing, and providing some of  the information that the bill has                                                               
indicated to make SB 17 a success.                                                                                              
                                                                                                                                
CHAIR HUGHES  thanked Mr. Thayer  for addressing  which buildings                                                               
are PCE qualified.                                                                                                              
                                                                                                                                
4:52:12 PM                                                                                                                    
CHAIR HUGHES held SB 17 in committee.                                                                                           
                                                                                                                                

Document Name Date/Time Subjects
SB 13 Version B.PDF SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Sectional Analysis.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Sponsor Statement.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - 2019-02 AML resolution - Reimburse Property Tax Exemption.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Higher Education Fund, UA Summary.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Legislative Finance Email on Capital Income Fund.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Revenue Sourcebook 2020 Excerpts.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Senior Citizen Property Tax Exemption History.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 13 Supporting Document - Senior Property Tax Exemption - Jurisdiction.pdf SCRA 2/25/2021 3:30:00 PM
SB 13
SB 17 v. A Legislation.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Sectional Analysis 1.27.2021.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Sponsor Statement 1.27.2021.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - Energy Program Overview Brief.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - EPSC Diagram.JPG SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - HB 306 2010 State Energy Policy.PDF SCRA 2/25/2021 3:30:00 PM
HB 306
SB 17
SB 17 v. A Supporting Document - State ESPC Policies.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - NMESCO_Begich.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB 17 v. A Supporting Document - Sustainable Energy Act Annual Report to Legislature (2020)_Final.pdf SCRA 2/25/2021 3:30:00 PM
SB 17
SB15 Sectional Analysis 2.23.21.pdf SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB15 Stupport Document States with Open Meetings Penalties Table.pdf SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB 15 Version B.PDF SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB15 Stupport Document States with Open Meetings Penalties Map.pdf SCRA 2/25/2021 3:30:00 PM
SB 15
SB15 Sponsor Statement 2.24.21 A.pdf SCRA 2/25/2021 3:30:00 PM
SB 15
SB15 Presentation 2.25.21.pdf SCRA 2/25/2021 3:30:00 PM
SJUD 3/17/2021 1:30:00 PM
SB 15
SB13 AOGA Letter of Opposition - 2.25.21.pdf SCRA 2/25/2021 3:30:00 PM
SB 13