Legislature(2021 - 2022)BELTZ 105 (TSBldg)
02/25/2021 03:30 PM COMMUNITY & REGIONAL AFFAIRS
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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.