Legislature(2017 - 2018)BUTROVICH 205

04/10/2018 03:30 PM STATE AFFAIRS

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          SB 190-ENERGY EFFICIENCY OF PUBLIC BUILDINGS                                                                      
3:33:22 PM                                                                                                                    
CHAIR MEYER announced the consideration of Senate Bill 190 (SB
3:33:39 PM                                                                                                                    
SENATOR TOM BEGICH, Alaska State Legislature, Juneau, Alaska,                                                                   
sponsor of SB 190, provided an overview as follows:                                                                             
     This  bill  is  a  continuation  and  expansion  of  an                                                                    
     existing  piece of  legislation that  we are  currently                                                                    
     operating  under. The  State of  Alaska is  responsible                                                                    
     for $650 million in energy  costs associated with close                                                                    
     to 5000 different facilities.                                                                                              
     In 2010 the  Alaska Sustainable Energy Act  set forth a                                                                    
     goal of  energy efficiency retrofits for  25 percent of                                                                    
     our state  buildings, those were buildings  over 10,000                                                                    
     square feet. The  goal was to get to that  target of 25                                                                    
     percent by 2020. Our state  was able to reach that goal                                                                    
     by  2014  and  Senate  Bill  190  simply  extends  that                                                                    
     program  to schools  and  those  other large  community                                                                    
     centers    which    are   eligible    for    power-cost                                                                    
     equalization;  this  creates incentives  for  buildings                                                                    
     receiving state  support for energy bills  so that they                                                                    
     may   perform  retrofits   saving  the   state,  school                                                                    
     districts and communities money.                                                                                           
     I have spoken before  in the Senate Education Committee                                                                    
     and in  other forums about  the high cost of  energy in                                                                    
     rural schools  and this  would be  a way  of addressing                                                                    
     some of  those costs  and ensuring  that more  of those                                                                    
     energy cost  that are diverted  away from  teachers can                                                                    
     go back to teachers, for example.                                                                                          
     Senate   Bill   190   proposes   financing   efficiency                                                                    
     retrofits   by  incentivizing   a  successful   private                                                                    
     financing    called    "Energy   Service    Performance                                                                    
     Contracts,"  or  contracting   "ESCOs,"  there's  other                                                                    
     names for  these, you will  hear those  names described                                                                    
     as we  go through the  process, but essentially  it's a                                                                    
     partnership  with  private   companies  to  absorb  the                                                                    
     frontend of the cost of  these retrofits so that we can                                                                    
     benefit  publicly on  the backend.  These processes  in                                                                    
     this  contracting   has  minimal  cost  to   the  state                                                                    
     upfront,  the  energy  contracting  companies  pay  for                                                                    
     those   upfront  costs   associated  with   the  energy                                                                    
     efficiency  retrofits  and  then are  paid  back  using                                                                    
     those guaranteed cost  savings. SB 190 sets  a goal for                                                                    
     the state  and certain  public buildings to  enter into                                                                    
     about  a  $100  million   worth  of  these  performance                                                                    
     contracts  by  2025 to  pay  for  energy retrofits  set                                                                    
     forth in the bill.                                                                                                         
3:36:25 PM                                                                                                                    
SYDNEY   LIENEMANN,   Staff,   Senator   Begich,   Alaska   State                                                               
Legislature, Juneau, Alaska, provided a sectional analysis of SB
190 as follows:                                                                                                                 
     Section 1                                                                                                              
     Outlines the legislative intent  that the energy audits                                                                    
     and retrofits outlined in  this legislation be financed                                                                    
     using  service-performance-contracting mechanism  where                                                                    
     upfront construction  costs are  paid by a  third party                                                                    
     either  using  Alaska   Housing  Finance  Corporation's                                                                    
     energy  efficiency  revolving  loan programs  or  by  a                                                                    
     contracting  company  with  those costs  paid  back  by                                                                    
     guaranteed energy savings from those retrofits.                                                                            
     Section 2                                                                                                              
     Adds to a statute  regarding the Alaska Housing Finance                                                                    
     Corporation  to  coordinate   with  the  Alaska  Energy                                                                    
     Authority  (AEA)  when  performing  energy  audits  for                                                                    
     community   buildings    eligible   for    power   cost                                                                    
     equalization (PCE) over 5,000 square feet.                                                                                 
     Section 3                                                                                                              
     Gives the  Alaska Energy Authority, the  Alaska Housing                                                                    
     Finance    Corporation,   and    the   Department    of                                                                    
     Transportation and  Public Facilities the  authority to                                                                    
     perform energy audits  on community facilities eligible                                                                    
     to receive  power cost  equalization over  5,000 square                                                                    
     feet,  and  these are  the  three  state entities  with                                                                    
     expertise  or funding  streams  that  are dedicated  to                                                                    
     performing energy audits or energy retrofits.                                                                              
     Section 4                                                                                                              
     Requires that  public schools receive energy  audits on                                                                    
     the  same   schedule  as  other  public   buildings  as                                                                    
     required  by the  Alaska Sustainable  Energy Act  which                                                                    
     passed into law in 2010.                                                                                                   
     Section 5                                                                                                              
     Defines those public  schools excluding charter schools                                                                    
     eligible for energy retrofits under this bill.                                                                             
     Section 6                                                                                                              
     Outlines   coordination  between   the  Alaska   Energy                                                                    
     Authority and  the Alaska Department  of Transportation                                                                    
     and Public  Facilities to perform  those audits  on PCE                                                                    
     eligible community facilities.                                                                                             
     Section 7                                                                                                              
     Since this  legislation extends the universe  of public                                                                    
     buildings  requiring  energy  audits,  it  extends  the                                                                    
     deadline and  pushes that  back to  2025 from  2020; it                                                                    
     also makes this contingent  on the financing being able                                                                    
     to  be paid  off within  15  years so  if those  energy                                                                    
     efficiency retrofits  will payoff  within 15  years and                                                                    
     also says,  "If funding  is available,"  so it's  not a                                                                    
     Section 8                                                                                                              
     Expands buildings  that described as  public facilities                                                                    
     to  include  educational  buildings  like  schools  and                                                                    
     reduces   the  minimum   size  for   buildings  to   be                                                                    
     considered for  retrofits from 10,000 square  feet down                                                                    
     to 5,000 square feet.                                                                                                      
     Section 9                                                                                                              
     Adds  to the  section of  Alaska statute  governing the                                                                    
     Alaska Energy  Authority, a section which  requires all                                                                    
     PCE  eligible public  facilities to  receive an  energy                                                                    
     audit every  seven years  unless the  facility managers                                                                    
     refuse  the  energy  audit.  AEA  will  work  with  the                                                                    
     Department of  Transportation and Public  Facilities to                                                                    
     identify  public   and  private  funding   sources  and                                                                    
     perform the audits.                                                                                                        
3:39:06 PM                                                                                                                    
SENATOR BEGICH  noted documents  in the  packets and  pointed out                                                               
Hawaii's fact  sheet on a  similar program where the  state saved                                                               
hundreds of  millions of dollars.  He referenced a  document that                                                               
detailed  Alaska's  school  energy  costs  from  2007-2017  which                                                               
indicates the  high costs the  state pays for energy  in schools.                                                               
He  pointed  out  the Department  of  Transportation  and  Public                                                               
Facilities'  2016  report  on  savings  achieved  on  performance                                                               
contracting.  He concluded  the document  overview by  addressing                                                               
the  state's  current  energy  performance  contracting  policies                                                               
which has saved $3.6 million.                                                                                                   
He  summarized that  for a  small  upfront amount  of money,  the                                                               
state could save as much as $100 million on energy costs.                                                                       
3:41:23 PM                                                                                                                    
SENATOR GIESSEL addressed section 1 regarding legislative intent                                                                
and read from the bill's sectional analysis and queried as                                                                      
     Upfront  construction costs  are  paid for  by a  third                                                                    
     party, it  mentions Alaska Housing  Finance Corporation                                                                    
     or by a contracting company  with those costs paid back                                                                    
     using  guaranteed energy  savings. So,  I'm looking  at                                                                    
     the  fiscal note  and it  looks like  the general  fund                                                                    
     appropriation, at  least I'm looking only  at the first                                                                    
     year and  I realize  it drops  slightly in  the ongoing                                                                    
     years, but it's $621,000, but  it's $2 million and that                                                                    
     looks like receipt authority.  So, you're thinking that                                                                    
     construction companies  are going to fund  this upfront                                                                    
     and  then somehow  get their  costs  paid back  through                                                                    
     guaranteed energy savings, how does that work?                                                                             
SENATOR BEGICH explained as follows:                                                                                            
     This  is exactly  how we  do it  now and  those savings                                                                    
     have been realized  and the little bit  of general fund                                                                    
     money you brought up, because  we are going to be doing                                                                    
     more audits,  that's one of  the reasons why  you would                                                                    
     have that.                                                                                                                 
3:43:07 PM                                                                                                                    
MS. LIENEMANN explained the ESCO process as follows:                                                                            
     The way it generally works  is one of these contracting                                                                    
     companies will  set into a  contract with the  state or                                                                    
     with the  federal government and  they will  perform an                                                                    
     audit  to see  how much  money can  be saved  and there                                                                    
     will  be those  guaranteed savings  and then  the money                                                                    
     that you would  normally be paying to  your energy bill                                                                    
     above the cost  savings would go to the  company to pay                                                                    
     them off  over the length  of the contract,  then after                                                                    
     five years  or ten  years, whatever  the length  of the                                                                    
     contract is, the  contract company is done,  you get to                                                                    
     receive those  energy cost savings and  your costs drop                                                                    
     dramatically  after you  have  paid  off those  upfront                                                                    
     capital costs.                                                                                                             
3:44:01 PM                                                                                                                    
SENATOR BEGICH added to Ms. Lienemann's explanation as follows:                                                                 
     That's one of the keys  here, we don't have the ability                                                                    
     to just simply fund at  the school-district level or at                                                                    
     the state level.  The kind of retrofits  we are talking                                                                    
     about here  would cost  the state  tens of  millions of                                                                    
     dollars  to  do  so.  So,  this  methodology  basically                                                                    
     doesn't  change in  the near  term the  cost of  energy                                                                    
     that would be paid, say  at the length of the contract,                                                                    
     five  or ten  years, but  the minute  that contract  is                                                                    
     paid off,  all of those  savings are realized  and that                                                                    
     is when  the big benefit  kicks in.  So, it's a  way of                                                                    
     looking at our tough  fiscal situation and innovatively                                                                    
     coming up  with a  way we  can retrofit  buildings that                                                                    
     would otherwise probably languish  for another 10 or 20                                                                    
     years, possibly  even up to replacement  time before we                                                                    
     can do anything to ensure energy savings from them.                                                                        
SENATOR COGHILL asked if a survey  has been done on the number of                                                               
5,000-square-foot  facilities  that  would  be  impacted  by  the                                                               
3:45:28 PM                                                                                                                    
MS.   LIENEMANN   answered   that  the   Alaska   Department   of                                                               
Transportation  on Public  Facilities  (DOT&PF)  in their  fiscal                                                               
note cited 430 buildings.                                                                                                       
SENATOR COGHILL addressed section  2 regarding the Alaska Housing                                                               
Finance Corporation  (AHFC) coordinating  with the  Alaska Energy                                                               
Authority (AEA) to  perform audits. He asked  what was previously                                                               
permissive and what would be new from the requirement.                                                                          
MS. LIENEMANN  explained that DOT&PF  was responsible  for audits                                                               
but because  PCE is administered  by AEA, AEA takes  ownership of                                                               
the facilities. She  summarized that the bill would  allow AEA to                                                               
work with DOT&PF to perform the energy audits.                                                                                  
SENATOR  COGHILL   addressed  section  8  and   noted  that  both                                                               
governmental and  educational facilities were included.  He asked                                                               
what  the  breakout  was  between  governmental  and  educational                                                               
MS.  LIENEMANN replied  that previous  reports were  done by  the                                                               
Alaska Housing  Finance Corporation and the  Cold Climate Housing                                                               
Research  Center   that  broke  down  the   different  number  of                                                               
buildings  that belong  to  school districts  as  opposed to  the                                                               
State of Alaska.                                                                                                                
3:47:54 PM                                                                                                                    
SENATOR COGHILL  noted that the  requirement in section 9  can be                                                               
waived and asked for an explanation.                                                                                            
MS. LIENEMANN explained  that the goal was not to  make a mandate                                                               
for anyone to  have an energy audit without  a community facility                                                               
impacting its  PCE. She emphasized  that the legislation  was not                                                               
meant  to be  a threat,  just  something helpful  that the  state                                                               
could provide.                                                                                                                  
SENATOR BEGICH  added that he  was very  keen on not  adding more                                                               
mandates to communities  but to make the state  more efficient in                                                               
how it does  its facility management. He opined  that the opt-out                                                               
provision  would  encourage communities  to  do  an energy  audit                                                               
rather than discouraging them.                                                                                                  
SENATOR  WILSON noted  that Senator  Begich during  his sponsor's                                                               
statement  said   25  percent  of  the   state's  buildings  were                                                               
retrofitted for energy efficiency and asked  why he did not go on                                                               
to get another 25 percent of state buildings under compliance.                                                                  
3:49:33 PM                                                                                                                    
SENATOR  BEGICH  replied that  in  discussions  with DOT&PF,  the                                                               
department indicated  that there  were just  a few  buildings. He                                                               
explained that the idea  was to try and make as  big an impact as                                                               
possible. He  said he  had a strong  concern about  energy costs,                                                               
particularly in  rural Alaska. He asserted  that SB 190 is  a way                                                               
to get to long term lowering  of energy costs in rural Alaska and                                                               
to redirect state resources to teaching and education.                                                                          
SENATOR WILSON pointed  out that in some  rural communities there                                                               
is a  general cost to provide  power and once the  threshold goes                                                               
below the minimum  cost, somebody must bear the cost.  He said if                                                               
a school  does not bear the  cost, then the cost  gets spread out                                                               
equally throughout  the community through higher  rates. He asked                                                               
if there  was a plan to  address the expectation for  lower rates                                                               
after retrofitting  that resulted in  bills staying the  same due                                                               
to an increase in rates.                                                                                                        
3:52:18 PM                                                                                                                    
SENATOR BEGICH replied  that there is no mandate,  primarily if a                                                               
school  district  that   is  receiving  PCE  does   not  want  to                                                               
participate. He  noted that SB 190  is part of a  complex process                                                               
of determining ways  to lower costs without raising  the cost for                                                               
individuals.  He  asserted  that  he would  continue  to  propose                                                               
legislation to  effectively lower  energy costs.  He said  he did                                                               
not  think any  school district  would want  to raise  the energy                                                               
costs for  residents. He  conceded that  he has  heard resistance                                                               
due to  higher rates, but that  was one of the  reasons why there                                                               
is no  mandate. He  summarized that  if ways  are found  to lower                                                               
energy  costs  in  the  long   run,  then  ways  to  payback  the                                                               
artificially  increased energy  costs in  rural villages  will be                                                               
CHAIR MEYER addressed section 5  regarding a statute quotation as                                                               
to what  a public school  is. He  noted that the  "public school"                                                               
definition did  not include  charter schools  and asked  if there                                                               
was a reason why that was not included.                                                                                         
MS.  LIENEMANN explained  that  the decision  was  to, "Keep  the                                                               
universe  small to  start with,"  but there  were no  reasons why                                                               
other  educational  facilities  could  not  be  included  if  the                                                               
program proved to be successful.                                                                                                
SENATOR BEGICH added that charter  schools tend to be smaller and                                                               
operate under tight budgets. He said  he did not feel that it was                                                               
necessary  to  include  a  charter  school  in  the  process  but                                                               
indicated that they certainly could be.                                                                                         
3:54:54 PM                                                                                                                    
CHAIR MEYER asked  if people who go through  the proposed process                                                               
would receive  a grant and there  would be no money  out of their                                                               
MS. LIENEMANN answered as follows:                                                                                              
     The  aim is  that there  would  be no  grant, but  they                                                                    
     wouldn't be out of pocket  money to start out with. So,                                                                    
     they would  enter into a contract,  the energy-service-                                                                    
     contracting   company  would   come  in,   perform  the                                                                    
     upgrades and then the school  district or the community                                                                    
     center would  see no difference  in their  energy costs                                                                    
     for the length  of the contract with  the savings going                                                                    
     to  pay off  that contract,  to pay  off those  upfront                                                                    
     capital  costs.  For the  school  district  or for  the                                                                    
     community center,  or the  public facility,  they would                                                                    
     essentially see  no change in their  energy costs until                                                                    
     the   end  of   the   contract  when   it  would   drop                                                                    
     dramatically despite  having those  efficiency upgrades                                                                    
     having been made.                                                                                                          
SENATOR BEGICH  emphasized that there  would be no  upfront costs                                                               
to  the school  and that  the contractor  would bear  the upfront                                                               
CHAIR  MEYER noted  his  concern  that even  though  a school  is                                                               
retrofitted  that  energy savings  may  not  be realized  because                                                               
students may leave windows and  doors open. He confirmed that the                                                               
proposed  program was  optional, but  questioned the  fiscal note                                                               
presented  by  the  DOT&PF  and  the  need  for  four  people  to                                                               
administer an optional program. He  added that he wondered if AEA                                                               
has the staff to do all the audits that need to be done.                                                                        
3:57:32 PM                                                                                                                    
CHAIR MEYER opened public testimony.                                                                                            
3:57:58 PM                                                                                                                    
DONALD  GILLIGAN,  President,   National  Association  of  Energy                                                               
Service  Companies (NAESCO),  Salem, Massachusetts,  testified in                                                               
support  of  SB  190.  He  noted  that  members  of  NAESCO  have                                                               
delivered   approximately  $60   billion  worth   of  performance                                                               
contracting projects during  the last 30 years.  He detailed that                                                               
NAESCO is delivering  $6 billion to $7 billion  worth of projects                                                               
a year. He  noted that over $3  billion out of the  $6 billion to                                                               
$7 billion in  projects are in public schools.  He explained that                                                               
the   types  of   projects   NAESCO   delivers,  Energy   Savings                                                               
Performance  Contracts  (ESPC),  are authorized  by  the  federal                                                               
government and all 50 states.  He added that the ESPC contracting                                                               
process has had very strong  bi-partisan support for 30 years. He                                                               
noted  that  the  current  White  House  administration  supports                                                               
public-private partnerships  where private  money is  invested to                                                               
improve public facilities.                                                                                                      
He explained  that a performance contract  repurposes money spent                                                               
on wasted energy or obsolete  equipment into a payment stream for                                                               
capital improvements.  He detailed that the  capital improvements                                                               
pay for themselves  from energy and maintenance  savings over the                                                               
life  of the  contract while  delivering capital  improvements in                                                               
the  form of  new  lighting, heating,  controls, windows,  doors,                                                               
roofs, whatever the building needs to become energy efficient.                                                                  
He  addressed  measures  that  typically  are  in  a  performance                                                               
contract  which  includes  retrofitting,  advanced  measures  and                                                               
renewable energy measures.                                                                                                      
4:01:24 PM                                                                                                                    
He explained what  is driving the retrofits and  noted that there                                                               
are a  couple of major drivers.  He said number one  is a mandate                                                               
at all  levels of government to  stop wasting money and  what the                                                               
contracts do  is stop  wasting money  and diverts  an expenditure                                                               
into  a  productive use.  He  disclosed  that there  are  federal                                                               
mandates  which  have been  ongoing  for  the  last 20  years  to                                                               
upgrade  the  efficiency of  federal  facilities.  He noted  that                                                               
Senator Begich has  talked about the success  of Alaska mandating                                                               
the  upgrading  of  many  state   facilities.  He  asserted  that                                                               
committee members will see that  the key to the program's success                                                               
is an  actual mandate that is  enforced at the state  level where                                                               
the state is behind a real push for energy efficiency.                                                                          
MR. GILLIGAN  disclosed that over  the last 4  or 5 years  at the                                                               
federal level, the  federal government has done  about $5 billion                                                               
worth  of   ESPC  projects  in  response   to  President  Obama's                                                               
performance  contracting  challenge.  He  noted  that  the  Trump                                                               
administration  has  just  issued  a new  set  of  contracts  for                                                               
federal  facilities,  21  companies   have  the  ESPCs  with  the                                                               
anticipation that there  will $10 billion worth  of projects done                                                               
over the  next 8 years  at the federal  level. He added  that the                                                               
Trump administration  also developed a  new analysis of  how much                                                               
value there is in performance  contracting around the country and                                                               
they came  up with  the estimate  of a  potential market  of $200                                                               
billion to $300 billion.                                                                                                        
4:03:33 PM                                                                                                                    
He  disclosed  that  the employment  potential  of  the  programs                                                               
results in  every million dollars'  worth of projects  involves 9                                                               
to 10  direct or indirect jobs.  He specified that the  ESPC jobs                                                               
really  cannot be  outsourced because  local contractors  deliver                                                               
the projects  in the local  communities. He added that  there are                                                               
multiplier  jobs  for  the  value  of  keeping  the  expenditures                                                               
currently  spent on  wasted energy  in the  community, ultimately                                                               
adding up to approximately 21  jobs per million dollars' worth of                                                               
projects  which  would mean  that  the  target  in SB  190  would                                                               
produce more than 2,000 jobs.  He emphasized that the performance                                                               
of  the  projects  is  dependent  on  long  term  operations  and                                                               
maintenance,  but that  means there  are additional  jobs or  job                                                               
upgrades in  maintaining this equipment rather  than spending the                                                               
money on wasted energy.                                                                                                         
4:05:08 PM                                                                                                                    
SENATOR GIESSEL asked  if NAESCO members have  ever been involved                                                               
in Alaska projects.                                                                                                             
MR. GILLIGAN  answered yes. He disclosed  that Siemens-Alaska has                                                               
been involved and detailed that  NAESCO members have done several                                                               
projects  for  the  U.S.  Coast  Guard and  the  Bureau  of  Land                                                               
Management in  Fairbanks as well  as some very large  projects at                                                               
Alaska's military bases.                                                                                                        
SENATOR GIESSEL asked if Siemens-Alaska is a local company.                                                                     
MR. GILLIGAN answered  that Siemens-Alaska is a  branch office of                                                               
an international company.                                                                                                       
SENATOR COGHILL  asserted that SB  190 was an excellent  idea. He                                                               
noted that he  wonders if the payback from the  energy savings is                                                               
realized or do  retrofits continually have to  occur. He remarked                                                               
that energy  may be saved  but questioned whether costs  are ever                                                               
reduced.  He asked  if the  payback  time is  something that  has                                                               
become valuable.                                                                                                                
MR.  GILLIGAN   answered  that  the  project   can  be  developed                                                               
according to the  requirements of the customer. He  noted that if                                                               
the customer wants  a very quick payback so that  the project can                                                               
generate cash savings from day-one,  that kind of project doesn't                                                               
get you  a comprehensive retrofit, it  may not solve some  of the                                                               
long-term  capital or  maintenance problems  in the  building. He                                                               
pointed  out that  a  customer  can have  a  three or  five-year-                                                               
payback  project which  generates cash  savings from  day-one. He                                                               
said  on the  other end  of the  spectrum that  a customer  could                                                               
invest their  savings in  long-term capital  improvements solving                                                               
the bigger long-term  problems of the building so  that the state                                                               
or local government  would not have to appropriate  new tax money                                                               
to deal with issues like roofs or windows.                                                                                      
4:08:02 PM                                                                                                                    
SENATOR COGHILL  opined that the  concept was an  as-needed basis                                                               
and noted that he would look over  a range of projects to see how                                                               
they turned out.  He noted that the  bill addresses 5,000-square-                                                               
footage  facilities,  a size  that  he  believed was  small,  and                                                               
inquired  if smaller  facilities  result in  tighter margins.  He                                                               
asked if Mr. Gilligan has  dealt with 5,000 square foot municipal                                                               
and state facilities.                                                                                                           
MR.  GILLIGAN conceded  that  doing individual  5,000-square-foot                                                               
buildings is very difficult. He continued as follows:                                                                           
     The state organizing a project  of willing customers so                                                                    
     that  you  can  aggregate  a  fairly  large  number  of                                                                    
     facilities and  be able  to do  those in  a streamlined                                                                    
     way,  it  would be  quite  difficult  to do  individual                                                                    
     5,000-square-foot buildings scattered  across the whole                                                                    
     state of  Alaska, you  would really  have to  pull them                                                                    
     together and  figure out  how to do  it, but  there are                                                                    
     resources in Alaska that I think can handle this.                                                                          
4:09:22 PM                                                                                                                    
SENATOR COGHILL commented as follows:                                                                                           
     I think  when we  start talking about  communities that                                                                    
     we are  going to  qualify based  on the  PCE, certainly                                                                    
     energy is a big issue,  but they are definitely islands                                                                    
     to  themselves,  so they  are  definitely  going to  be                                                                    
     something you would  have to template and  maybe I will                                                                    
     ask  the  sponsor  how  he envisions  that  kind  of  a                                                                    
SENATOR EGAN noted  that he had done an energy  audit on his home                                                               
and received  an AHFC  loan for an  energy upgrade.  He explained                                                               
that  he had  to pay  off the  loan and  the state  did not  lose                                                               
money. He  asked if the  proposed legislation was an  offshoot of                                                               
the energy audit and loan that he received.                                                                                     
CHAIR MEYER asked  if the program Senator Egan  described is like                                                               
the proposed legislation.                                                                                                       
MR.  GILLIGAN answered  essentially  yes. He  specified that  the                                                               
difference  is  the  energy   service  companies  guarantees  the                                                               
savings  and takes  the technical  risk that  the retrofits  will                                                               
save the money that is required to pay off the loan.                                                                            
4:11:30 PM                                                                                                                    
SENATOR EGAN concurred with Mr.  Gilligan and noted that his home                                                               
was re-audited and ultimately saved money.                                                                                      
MR. GILLIGAN explained that the  projects typically have the kind                                                               
of reports that Senator Egan noted  but not just once, every year                                                               
for  the length  of  the  project so  that  the  customer can  be                                                               
assured that the  project is saving money. He  emphasized that if                                                               
a problem develops, the ESCO is responsible for fixing it.                                                                      
CHAIR MEYER  asked if  Siemens-Alaska is  one of  the contractors                                                               
that is used for ESCO projects.                                                                                                 
MR.  GILLIGAN  answered  yes.  He   noted  that  Siemens  does  a                                                               
tremendous amount of performance contracts across the country.                                                                  
4:13:16 PM                                                                                                                    
STACY  SCHUBERT,  Director,  Governmental  Relations  and  Public                                                               
Affairs,  Alaska Housing  Finance Corporation  (AHFC), Anchorage,                                                               
Alaska, admitted that  people tend to think  about AHFC regarding                                                               
energy   efficiency   for   the   Energy   Rebate   Program   and                                                               
CHAIR MEYER asked if the concept proposed in SB 190 will work                                                                   
the same way as home audits.                                                                                                    
4:14:13 PM                                                                                                                    
JOHN ANDERSON, Director, Research and Rural Development, Alaska                                                                 
Housing Finance Corporation (AHFC), Anchorage, Alaska, explained                                                                
AHFC's role as follows:                                                                                                         
     How we  got involved in this  is back in 2009  with the                                                                    
     American  Recovery   and  Reinvestment  Act.   AHFC  in                                                                    
     conjunction with  the Alaska Energy  Authority received                                                                    
     many  millions of  dollars, at  that time  we had  also                                                                    
     received $300  million for the  Home Energy  Rebate and                                                                    
     Weatherization Program.  Our team at AHFC  found a hole                                                                    
     in the  process to  be able  to use  $10 million  to go                                                                    
     after multi-family-public-facility  retrofit and energy                                                                    
     efficiency projects. What  we did back then  is we went                                                                    
     in  and  did  benchmarking  on  1,200  facilities,  and                                                                    
     benchmarking  is  basically   a  documentation  of  the                                                                    
     facility's   size,   use,    energy   use   and   basic                                                                    
     information; of those benchmark  buildings we chose 327                                                                    
     buildings  that were  very inefficient  as far  as data                                                                    
     that  we  had  collected,  and we  went  and  performed                                                                    
     level-2  audits  on the  327  buildings  and half  were                                                                    
     schools.  From that  process, and  from 2009  and 2010,                                                                    
     state  legislation  happened  that  provided  AHFC  the                                                                    
     bonding authority of $250  million; that's just bonding                                                                    
     authority,  we do  not  have that  money,  but it  also                                                                    
     helped us  create the Energy Efficiency  Revolving Loan                                                                    
     Fund for  public facilities.  Through that  process and                                                                    
     the involvement  of that, AHFC developed  a standard of                                                                    
     what we  call the  Retrofit Energy Assessment  for Loan                                                                    
     (REAL)  or for  funding,  it's titled  "loan," but  our                                                                    
     intention is for funding of some nature.                                                                                   
     At the  end of the day  that is what AHFC  really wants                                                                    
     to see in  reference to not just  public facilities and                                                                    
     us  working with  DOT&PF  and AEA,  but  our own  1,600                                                                    
     public housing  units that we  have that are  really of                                                                    
     the commercial  model, mainly. The standard  is what we                                                                    
     believe is  the important  characteristic here.  In the                                                                    
     REAL manual we do have  ESCOs listed, we do have energy                                                                    
     performance contracting  models that are in  there, but                                                                    
     we  have  also worked  in  conjunction  with DOT&PF  to                                                                    
     create a  smaller version of that  aspect called Energy                                                                    
     Project Developers, it was a  statewide RFP and DOT&PF,                                                                    
     and  Alaska Housing  worked  hand-in-hand  to put  that                                                                    
     out,  there's  a  smaller list  of  approved  qualified                                                                    
     entities that perform smaller  projects. The process to                                                                    
     do 5,000  square foot  buildings one-on-one,  the ESCOs                                                                    
     will not touch that type  of a project, we've been told                                                                    
     over and over its very difficult for them.                                                                                 
     That's really in  a nutshell is how  AHFC got involved.                                                                    
     We  developed  a  white-paper, a  very  in-depth  white                                                                    
     paper, in  November of  2012 is  when we  published it,                                                                    
     and  that  white-paper  indicated through  all  of  the                                                                    
     information that we had gathered  at the time of all of                                                                    
     the audits  and all of  the bench markings we  did that                                                                    
     the  potential improvements  from energy  savings could                                                                    
     be roughly  $125 million a  year for  public facilities                                                                    
     alone. You  have to remember  that that is  a time-and-                                                                    
     time caption  because the cost  of energy  in 2009-2011                                                                    
     is a lot  different than what it looks  like today. Any                                                                    
     type of  a project  that gets established  through this                                                                    
     or  through the  lesser version  of the  energy project                                                                    
     developer or even inhouse capability,  at some point in                                                                    
     time the project  has to pencil-out based  on energy on                                                                    
     that  day. We  don't know  what the  future brings,  we                                                                    
     don't know if it's going  to escalate, we don't know if                                                                    
     it's  going to  de-escalate, so  it's a  very difficult                                                                    
     process.  The ESCO  guarantee  in  normal fashion  will                                                                    
     guarantee the  energy savings, not  cost, so that  is a                                                                    
     factor moving forward. Senator  Begich pointed out that                                                                    
     the local  utilities, even though they  might be seeing                                                                    
     an   energy  consumption   reduction,   the  cost   may                                                                    
     increase. We  have witnessed that in  other communities                                                                    
     on  a smaller  level with  our weatherization  program,                                                                    
     but  it's kind  of  an unknown  factor.  We could  also                                                                    
     continue  to  have  a   technical  assistance  for  our                                                                    
     revolving loan program  for the REAL manual,  we have a                                                                    
     competitive grant  right now through the  Department of                                                                    
     Energy,  that is  also  doing what  is  called a  "kick                                                                    
     starter" program where we are  actually providing up to                                                                    
     $10,000 in  minimal grants to  go through  this process                                                                    
     using  those  energy  project   developers,  to  get  a                                                                    
     project  kind of  kick-started in  some of  these rural                                                                    
     communities and see actual how big the benefit is.                                                                         
4:19:54 PM                                                                                                                    
CHAIR MEYER asked if AHFC worked with the Alaska Energy                                                                         
Authority (AEA).                                                                                                                
MR.  ANDERSON answered  correct. He  noted  that AHFC  has had  a                                                               
monthly coordination  meeting with AEA  for the past  three years                                                               
and meetings  have been useful.  He explained that the  intent is                                                               
to  make sure  there  is  not overlapping  of  services and  that                                                               
activities are coordinated. He added  that AHFC works with DOT&PF                                                               
regarding  project   maintenance  and  verification,   an  aspect                                                               
required for contracts and guarantees.                                                                                          
SENATOR  GIESSEL asked  what Mr.  Anderson meant  by "Maintenance                                                               
has to be written into the  contract." She disclosed that she had                                                               
worked in rural Alaska and commented as follows:                                                                                
     I'm  going  to  speak  about schools,  that's  where  I                                                                    
     worked,   that  those   buildings,  which   are  called                                                                    
     "plants," they require some  expertise to maintain. So,                                                                    
     with  these energy  upgrades are  we talking  now about                                                                    
     yet more expertise being required in rural areas?                                                                          
4:21:41 PM                                                                                                                    
MR. ANDERSON  explained that  he was referring  to a  normal ESCO                                                               
model or "EBC" contract and explained as follows:                                                                               
     You would  have a process  that that contractor  has to                                                                    
     provide to  the owner of the  facility, maintenance and                                                                    
     verification that  their upgrades and their  process is                                                                    
     doing what they  said they were going to  do to achieve                                                                    
     the goal.                                                                                                                  
SENATOR GIESSEL replied as follows:                                                                                             
     I'm still blank. So, the  project is finished, maybe it                                                                    
     took  five years  to finish  and the  contractor is  on                                                                    
     their  way and  they are  waiting to  be paid  back now                                                                    
     with  the savings,  somebody  living  in the  community                                                                    
     where this 5,000-foot school is,  it's going to have to                                                                    
     maintain that building, they are  going to have to have                                                                    
     the expertise.  So, that's not  what you  are referring                                                                    
     to when you say maintenance must be in the contracts?                                                                      
MR. ANDERSON replied  that Senator Giessel was  correct that that                                                               
was  not what  he  was referring  to. He  specified  that he  was                                                               
referring  to a  maintenance  and verification  process that  the                                                               
contractor performed like they said they were going to.                                                                         
SENATOR  COGHILL readdressed  his  question on  5,000-square-foot                                                               
facilities and  asked if  Mr. Anderson's  expectation was  to get                                                               
several communities to quantify a general savings.                                                                              
MR. ANDERSON  replied that he  thought the process could  be done                                                               
regionally to combine a lot of facilities into one project.                                                                     
4:25:08 PM                                                                                                                    
CHRISTOPHER HODGIN, Energy Project  Manager, Alaska Department of                                                               
Transportation   and  Public   Facilities  (DOT&PF),   Anchorage,                                                               
Alaska, explained  the department's  implementation of SB  190 as                                                               
     Some parts of the bill  regarding the 5,000 square foot                                                                    
     threshold and the ability to  make those sized projects                                                                    
     work, what DOT&PF has done  on recent projects, we have                                                                    
     had  cases  where  we  have  had  buildings  that  were                                                                    
     smaller  scale,  so we  bundled  those  projects. In  a                                                                    
     recent  case we  had  16 maintenance  stations that  we                                                                    
     bundled  together,  so we  have  a  term contract  with                                                                    
     Energy Service  Contractors, Siemens  being one  of our                                                                    
     providers, so that's how we  were able to address those                                                                    
     situations with  remote stations  that were  smaller in                                                                    
     A  little about  what Mr.  Anderson was  speaking about                                                                    
     from  Alaska   Housing  Finance  Corporation,   he  was                                                                    
     speaking to  validating the  savings after  our project                                                                    
     was  complete, that  phase is  called "measurement  and                                                                    
     verification,"  so  after  a project  is  complete  the                                                                    
     ESCOs  like Siemens  visit the  project sites  again to                                                                    
     take  measurements and  validate  the projected  energy                                                                    
     savings  that they  proposed as  part  of the  projects                                                                    
     were indeed realized.                                                                                                      
He explained that DOT&PF operates  the state's Energy Performance                                                               
Contracting  Program.   He  detailed  that  the   department  has                                                               
invested  $35 million  in approximately  70  state buildings.  He                                                               
specified that  funding was done  with a combination  of financed                                                               
funds  borrowed  from  lenders,  state  funds,  and  the  federal                                                               
government's American  Reinvestment Recovery Funds.  He disclosed                                                               
that  the  annual monetized  savings  from  the program  is  $3.3                                                               
CHAIR  MEYER asked  if  the  state has  invested  $35 million  in                                                               
making  retrofits and  the savings  has  been approximately  $3.3                                                               
million per year.                                                                                                               
MR. HODGIN answered correct.                                                                                                    
CHAIR MEYER inquired if the $3.3  million in savings will be used                                                               
to pay off the loan that was financed.                                                                                          
4:28:28 PM                                                                                                                    
MR.  HODGIN  answered  correct. He  noted  that  DOT&PF's  recent                                                               
project  with  its  maintenance stations  used  Siemens  and  the                                                               
savings will be used to repay the loan with a private lender.                                                                   
CHAIR MEYER asked where the state funds came from.                                                                              
MR.  HODGIN replied  that  he  believed the  state  funds were  a                                                               
combination   of  general   funds   from  different   maintenance                                                               
SENATOR GIESSEL commented as follows:                                                                                           
     I'm still  caught in the  practicality here. If  we are                                                                    
     talking about rural schools, I  seriously am aware that                                                                    
     maintaining  these facilities  requires some  technical                                                                    
     knowledge that  may not be available  in the community.                                                                    
     So,  if  these facilities  are  going  to be  upgraded,                                                                    
     there's  going to  be more  information  needed by  the                                                                    
     folks that actually live in  these small communities of                                                                    
     175 people.  I'm just wondering about  the practicality                                                                    
     of  this, not  we don't  want to  do it;  again, having                                                                    
     worked in  these rural  schools I  can tell  you number                                                                    
     one, it's been my experience  being there in the winter                                                                    
     these  buildings are  vastly over  heated, I  mean yes,                                                                    
     opening windows to cool the  place off. There are a lot                                                                    
     of issues  when we  are talking  about rural  energy in                                                                    
CHAIR MEYER  noted that  PCE buildings run  on diesel  or heating                                                               
oil and asked if alternative  energy sources are being considered                                                               
for retrofits.                                                                                                                  
4:31:31 PM                                                                                                                    
KATIE  CONWAY,  Government   Relations  and  Outreach  Efficiency                                                               
Manager,  Alaska Energy  Authority, Anchorage,  Alaska, addressed                                                               
PCE buildings receiving retrofits as follows:                                                                                   
     The  PCE  component  and   potential  benefit  in  cost                                                                    
     savings  to  both  the state  and  the  facility  owner                                                                    
     should   that   result   in   implementation   measures                                                                    
     conducted  in  the  building  would  only  concern  the                                                                    
     electricity  savings,  but  there  would  likely  be  a                                                                    
     pretty significant savings on the  heat side as well. I                                                                    
     can say that the community facilities receiving power                                                                      
         cost equalization would probably have a lot of                                                                         
     potential savings identified in audit.                                                                                     
CHAIR MEYER replied  that PCE is obviously the  electric part but                                                               
noted that heating  fuel should also be thought  about for energy                                                               
savings as well.                                                                                                                
MS. CONWAY answered  that the audit would point  at both electric                                                               
and heat savings opportunities.                                                                                                 
4:33:48 PM                                                                                                                    
AMBER  MCDONOUGH,  Account  Executive, Energy  and  Environmental                                                               
Solutions,  Building  Technologies  Division,  Siemens  Industry,                                                               
Inc.,  Anchorage,  Alaska,  disclosed  that  Siemens  has  worked                                                               
DOT&PF, AHFC, and AEA. She asked  if Chair Meyer was inquiring if                                                               
consideration  was  given  to  all  options  when  Siemens  makes                                                               
recommendations. She  detailed that Siemens goes  through several                                                               
stages  during project  development where  different options  are                                                               
proposed with preliminary  pricing so that the end  user can pick                                                               
the  most  viable  solution.  She  said  incorporating  renewable                                                               
technology is ultimately up to the end user.                                                                                    
4:35:01 PM                                                                                                                    
CHAIR MEYER closed public testimony.                                                                                            
SENATOR  BEGICH  noted that  his  office  has worked  with  rural                                                               
districts on exploring renewable energy sources.                                                                                
CHAIR MEYER  pointed out  that a  renewable energy  program could                                                               
qualify for money from alternative energy programs.                                                                             
CHAIR MEYER held SB 190 in committee.                                                                                           

Document Name Date/Time Subjects
SB 190 Version J.PDF SSTA 4/10/2018 3:30:00 PM
SB 190
SB190 Sponsor Statement.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
SB190 Sectional Analysis.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
SB 190 Supporting Document Hawaii EPC Fact Sheet.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
SB 190 Supporting Documents DOTPF Energy Efficiency Projects.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
SB 190 ESPC PowerPoint.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
SB 190 Supporting Documents State ESPC Policies.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
SB 190 Supporting Documents School Energy Costs.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
HB 1 Version RA.PDF SSTA 4/10/2018 3:30:00 PM
HB 1
HB 1 Sponsor Statement.pdf SSTA 4/10/2018 3:30:00 PM
HB 1
HB 1 Memo of Changes.pdf SSTA 4/10/2018 3:30:00 PM
HB 1
HB 1 Supporting Document-Voting Information and Statistics.pdf SSTA 4/10/2018 3:30:00 PM
HB 1
HB 1 Support Letters.pdf SSTA 4/10/2018 3:30:00 PM
HB 1
HB 1 Fiscal Note.pdf SSTA 4/10/2018 3:30:00 PM
HB 1
HB 7 Version J.PDF SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Sponsor Statement.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Summary of Changes.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Sectional Analysis ver J.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Supporting Document-Article Columbia University.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Supporting Document-Article Denver Post.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Supporting Document-Article Washington Post.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Support Material Testimonies.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 7 Fiscal Note.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 7
HB 235 Version J.PDF SSTA 4/10/2018 3:30:00 PM
HB 235
HB 235 Sponsor Statement.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 235
HB 235 Summary of Changes.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 235
HB 235 Supporting Document - NCSL Awards for Law Enforcement or First Responders.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 235
HB 235 Officer Down Memorial Pages.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 235
HB 235 Letters of Support.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 235
HB 235 Fiscal Note.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 235
HB 235 Venn Diagram AK Medal for Heroism North Star Medal.pdf SSTA 4/10/2018 3:30:00 PM
SSTA 4/17/2018 3:30:00 PM
HB 235
SB 190 Fiscal Note.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
SB 190 Updated Fiscal Note.pdf SSTA 4/10/2018 3:30:00 PM
SB 190
HB 1 Sectional Analysis ver R.A.pdf SSTA 4/10/2018 3:30:00 PM
HB 1