02/09/2010 03:00 PM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| Overview(s) on Home Energy Rebate Program & Low Income Home Weatherization Program. | |
| HB296 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 296 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 9, 2010
3:07 p.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Charisse Millett, Co-Chair
Representative Kyle Johansen
Representative Jay Ramras
Representative Pete Petersen
Representative Chris Tuck
MEMBERS ABSENT
Representative Nancy Dahlstrom
COMMITTEE CALENDAR
OVERVIEW(S): HOME ENERGY REBATE PROGRAM & LOW INCOME HOME
WEATHERIZATION PROGRAM.
- HEARD
HOUSE BILL NO. 296
"An Act authorizing and relating to the issuance of bonds by the
Alaska Housing Finance Corporation; establishing the Alaska energy
efficiency revolving loan fund and relating to the fund; authorizing
municipalities and the State of Alaska to borrow money from the Alaska
Housing Finance Corporation for the purposes of the Alaska energy
efficiency revolving loan fund; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 296
SHORT TITLE: ENERGY EFFICIENCY BONDS; LOANS; FUND
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/19/10 (H) READ THE FIRST TIME - REFERRALS
01/19/10 (H) ENE, FIN
02/09/10 (H) ENE AT 3:00 PM BARNES 124
WITNESS REGISTER
DAN FAUSKE, CEO/Executive Director
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the Alaska Housing
Finance Corporation (AHFC) Rebate & Weatherization Program Legislative
Report; introduced HB 296 on behalf of the House Rules Committee by
request of the governor.
CARY BOLLING, Energy Specialist II
Energy Program Communications
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Presented the report titled, "AHFC Rebate &
Weatherization Programs: Legislative Report 2/2/2010.
JOHN ANDERSON, Weatherization Officer
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the presentation by the
Alaska Housing Finance Corporation (AHFC).
BRYAN BUTCHER, Director
Governmental Affairs and Public Relations
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the presentation by the
Alaska Housing Finance Corporation (AHFC).
JACK KRIENHEDER, Chief Policy Analyst
Office of the Director
Office of Management & Budget (OMB)
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: Testified during the hearing on HB 296.
ACTION NARRATIVE
3:07:13 PM
CO-CHAIR BRYCE EDGMON called the House Special Committee on Energy
meeting to order at 3:07 p.m. Present at the call to order were
Representatives Petersen, Tuck, Millett, and Edgmon. Representatives
Ramras and Johansen arrived as the meeting was in progress.
3:07:24 PM
^Overview(s) on Home Energy Rebate Program & Low Income Home
Weatherization Program.
Overview: Home Energy Rebate Program & Low Income Home Weatherization
Program
3:07:25 PM
CO-CHAIR EDGMON announced that the first order of business would be
overviews on the Home Energy Rebate Program & Low Income Home
Weatherization Programs.
3:08:01 PM
DAN FAUSKE, CEO/Executive Director, Alaska Housing Finance Corporation
(AHFC), Department of Revenue (DOR), informed the committee AHFC is
making progress on its dual programs of rebate and weatherization. He
recalled AHFC began the programs with original allocations of $200
million for weatherization and, $100 million for rebate, but after an
additional $60 million was funded for rebate, the total for both
programs was $360 million. He asked Mr. Bolling to present the report
titled "AHFC Rebate & Weatherization Programs: Legislative Report
2/9/2010."
3:09:07 PM
CARY BOLLING, Energy Specialist II, Energy Program Communications,
Alaska Housing Finance Corporation (AHFC), Department of Revenue
(DOR), began his presentation with a brief review of the
weatherization program. He said that of the $200 million allocated,
approximately $70 million has been encumbered. Previous to the
infusion of money into the program in 2008, an average of 600 homes
per year was weatherized. In FY 2009, approximately 1,740 homes were
weatherized; in FY 2010, 4,000 homes are expected to be weatherized;
and the number anticipated for FY 2011 is 7,500 homes. Mr. Bolling
advised that the five statewide weatherization providers, in addition
to the fifteen housing authorities, continue to "ramp up" their
operations to handle the increase. He continued to report that in FY
2008, 56 communities/areas were served; in FY 2009, 90
communities/areas were served; and he anticipated over 100
communities/areas would be served in FY 2010. Mr. Bolling called
attention to the Rebate Program and stated that $160 million was
allocated for the program in 2008, and the funds are fully encumbered.
He reminded the committee that residents have 18 months to complete
the rebate process, and $32 million has been expended so far.
Furthermore, over 20,000 ratings have been completed and 3,418 rebates
have been paid for an average amount of about $6,173. He noted that
the average participation rate is 72 percent and explained that this
percentage is the number of applicants who have gotten rebates within
the time limit of 18 months. Mr. Bolling added that new homes that
are built with a 5 Star Plus energy rating also qualify; in fact, 532
rebates have been paid for new homes in the amount of $7,500 each.
3:12:16 PM
REPRESENTATIVE TUCK asked for the reasons the participation rate is
not higher. For example, if applicants do not get the work done in
time or if they do not meet the criteria.
3:14:19 PM
MR. BOLLING clarified the 72 percent participation rate is for the
people who have had 18 months to complete the process. AHFC is
conducting a survey to determine why 28 percent decided not to
participate.
3:14:56 PM
MR. FAUSKE offered two known reasons: the rebate amount was
insignificant, or there was a shortage of resources [to pay for the
improvements].
3:15:45 PM
CO-CHAIR EDGMON asked whether AHFC has a regional breakdown on where
the benefits are going, and the availability of raters. He expressed
his appreciation for the job AHFC has done so far, but said he has
questions from his constituents.
3:16:04 PM
MR. BOLLING explained that there were 38 raters statewide at the
beginning of the program. At this time, there are 123 raters and 16
are in training status. Also, there is a roving rater who will travel
to communities that have three to five applicants who need an energy
rating. In response to the high demand at the outset of the program,
a centralized sign-up list was created to better organize and dispatch
raters. Mr. Bolling displayed a slide that showed there were in
excess of 9,000 houses on the statewide waitlist in 2008; however, in
December 2009, the program was declared fully encumbered and ratings
are not currently being dispatched.
3:18:45 PM
MR. FAUSKE further explained that when the application process is
started, $10,000 is set aside for that application. This guarantees
enough money for the applicants that do go through the process. If
applicants wait 18 months and then "opt out," the money that has been
set aside flows back into the program. He pointed out that the
waitlist is back up to 1,008 houses statewide and that is an
indication that there is an increased desire for the program.
Although the money is not gone, AHFC wants to avoid "stops and starts"
in funding. Mr. Fauske opined that the legislature needs to decide
whether it wants to continue the program, and if so, how to ensure
there are no stops and starts.
3:20:49 PM
CO-CHAIR EDGMON related his personal experience with the program. His
home qualified for $1,500 in improvements; however, in Dillingham,
that amount does not go as far as it does in Anchorage. His
constituents are interested in "what it would take to get the full
$10,000...."
3:21:29 PM
MR. BOLLING explained that the rebate amounts are based on increased
efficiency. For example, if a Four Star rated home is improved to a
Four Star Plus, that is a one step improvement and the home would be
eligible for up to a $4,000 rebate. On the other hand, the rebate is
also based on eligible receipts; therefore, if it cost $1,500 to
improve one step, that is the amount that would be rebated. Mr.
Bolling cautioned that for a fairly efficient home the rebate would
never reach $10,000, whereas a home at a One Star energy rating level
has more possibility for improvement.
3:22:53 PM
CO-CHAIR EDGMON questioned whether the owner of a One Star home can
afford to pay for $10,000 in improvements.
3:23:19 PM
JOHN ANDERSON, Weatherization Officer, Alaska Housing Finance
Corporation (AHFC), Department of Revenue (DOR), indicated that the
energy efficiency conditions of a house are not tied to income as much
as to the age of the building and method of construction. Over the
past 50 years, there have been design and construction changes that
have more of a correlation to the energy efficiency of a home than the
economic level of the family.
3:23:57 PM
MR. BOLLING observed that he teaches classes in Anchorage on how to
read energy ratings, and several students live in homes with One Star
energy ratings.
3:24:39 PM
CO-CHAIR EDGMON pointed out the inequity of the program in that the
cost of improvements to bring a One Star home to a higher level of
efficiency in a rural area would cost more than $10,000. Although the
program is well-intentioned, there remain disadvantages to residents
in Bush Alaska, such as the inability to get a rating done. He
suggested that there are more problems with the program then the two
Mr. Fauske mentioned; for example, how to address regional inequities
in the cost of improvements.
3:25:40 PM
MR. ANDERSON agreed. He then advised that the weatherization program
does calculate regional cost differences; however, although it was
discussed, the rebate program does not make any adjustment.
3:26:02 PM
REPRESENTATIVE TUCK suggested regional cost differences could be
adjusted in a way to similar to the funding of education, wherein
Anchorage is the "base" and communities with a higher cost per Btu
equivalency are compensated on a floating scale. Considering the high
cost of heating, he understood how rural homes may save more money
than urban homes by going one step up from a One Star rating.
3:27:02 PM
CO-CHAIR MILLETT asked for suggestions from AHFC as to how to lessen
the disparity between urban and rural residents.
3:27:52 PM
MR. FAUSKE recalled there were efforts to make the program as
equitable as possible; in fact, the program was increased from 60
percent to 100 percent of median income. He remarked:
We're talking about people in all areas of the state are
divided up differently and that median income is calculated
differently everywhere, so the differential gets built-in,
maybe it's not enough, but it does get built-in, rural
versus urban, depending on what your median income is and
you're still at 100 percent of median income or below to be
weatherized, and if you're above that you're into the
rebate."
MR. FAUSKE then reminded the committee that AHFC continues to offer,
at a low fixed rate, $30,000 15-year loans for home improvements. He
acknowledged that AHFC does not have enough money to do the whole
state, and the intent of the program was to concentrate on saving
energy. Actually, when the program was designed, AHFC considered
raising the median income, but that led to concerns about the Internal
Revenue Service (IRS). The weatherization program is currently tax-
exempt, but the rebate is taxable, and he cautioned against attracting
further scrutiny by the IRS. Mr. Fauske expressed his continued
support of the program and said "if we need to tweak it more, make it
more equitable ... we've not given up on anything, but it is tough."
He reviewed some of the problems with raters such as trying to train
local raters. Energy raters and weatherization assessors have very
similar tasks, and AHFC may decide that housing authorities can do the
work of raters in remote areas. Returning to the subject of income,
Mr. Fauske assured the committee that AHFC is trying to be fair, and
is open to suggestions.
3:31:49 PM
CO-CHAIR EDGMON asked whether AHFC staff has a regional analysis of
where the benefits have gone; for example, if the program works better
for those on the road system than for those off of the road system.
3:32:27 PM
MR. FAUSKE stated that AHFC divided the state by heating degree days,
the cost of fuel, and population, in order to prevent all of the money
from flowing strictly to urban areas. Furthermore, AHFC anticipated
that the majority of the rebate money would go to urban areas and more
weatherization money would go to rural areas. He expects the program
to continue to be successful in Fairbanks and Anchorage; however,
there are rural areas with activity and without activity. Recently he
met with the Association of Alaska Housing Authorities and discussed
ideas as to how to better implement the program, but he stressed that
there are rural areas that have already gone through their
allocations. The logistical support from local government sometimes
makes the difference. The housing authorities in Metlakatla, the
Northwest Arctic Borough, and Dillingham have had good success and
will need a re-allocation of funds. A total of 105 communities have
participated in the rebate program.
3:34:39 PM
MR. BOLLING returned to the presentation and provided statistics from
sampled homeowners. The average cost paid by the homeowner is
$10,500, and the average rebate is $6,100, which leaves an average
investment by the homeowner of $4,400. For a projected annual energy
savings per home of $1,300 to $1,500, the payback period is three
years. Further information tracked by the AHFC database indicates
that the average reduction in CO2 emissions for 3,129 homes is 12,352
pounds per year. The average increase in energy rating is two steps
of improvement for an average energy use reduction of about 32
percent. He then displayed a chart that showed the average annual
savings per home for: electricity, 711 kilowatts per hour (kWh);
natural gas, 931 hundred cubic feet (CCF); number two oil, 692
gallons; propane, 96 gallons, and wood, 2.4 cords. The projected
average energy cost reduction statewide is 26.8 percent. Mr. Bolling
turned to the second mortgage loan for energy conservation program and
re-stated that these loans are for up to $30,000, and have a 15-year
term. Presently the current loan activity is 104 loans. Regarding
the training aspect of the programs, he noted in 2009, there were
almost 100 professional classes with 1,384 students, and 317 consumer
classes with 3,908 students, that were held in 23 regional
communities.
3:37:42 PM
REPRESENTATIVE TUCK asked whether a savings of 2.4 cords of wood is
equivalent to a savings of 711 kWhs.
3:38:25 PM
MR. BOLLING explained that there is a different energy content in each
kind of fuel. A person paying $.10 per kWh in electricity is saving
$71.10 per year.
3:38:40 PM
REPRESENTATIVE TUCK surmised the fuels were equivalent in Btus, and
711 kWhs are the same as 2.4 cords of wood.
3:38:52 PM
MR. BOLLING further explained that the cost can vary because people
use different kinds of fuel. For those burning wood, the average
savings is 2.4 cords of wood; for those using natural gas, the average
savings is 931 CCF. This is not a direct comparison. Furthermore,
there are homes using different fuels for different purposes.
3:40:27 PM
CO-CHAIR EDGMON asked whether AHFC is planning to request more money
from the legislature for communities that have used their
weatherization allocation.
3:40:44 PM
MR. FAUSKE indicated that AHFC has contingency money available, and at
this time, is not going to take money from the regions that have not
used their funds. Nana, Southwestern Lake and Peninsula, Interior
Koyukuk, Middle Yukon, and Prince of Wales/Metlakatla have used their
allocations, but Juneau was designated $12.2 million and has $10.2
million remaining. He expected the numbers for the weatherization
program to change and assured the committee that AHFC is helping
regions that need better activity.
3:42:38 PM
CO-CHAIR EDGMON asked whether 18 months is an adequate period of time
for homeowners to get the work done.
3:42:56 PM
MR. FAUSKE said, "We think so." At the outset, the shortage of raters
was a hurdle, and he was also concerned about a shortage of sub-
contractors. However, he opined a shortage of raters is not a problem
now.
3:43:33 PM
BRYAN BUTCHER, Director, Governmental Affairs and Public Relations,
Alaska Housing Finance Corporation (AHFC), Department of Revenue
(DOR), added that if someone asks for an extension on the time limit
because they cannot get materials in time, or there are health issues,
AHFC will confirm that situation and work with them. He assured the
committee applicants are not penalized if there is a hardship.
3:44:46 PM
CO-CHAIR MILLETT asked whether AHFC knows how many people do not have
the cash for the upgrades, and how many have applied for the loan
program.
3:45:10 PM
MR. BUTCHER confirmed that AHFC has been compiling information from
applicants who are not completing the process after 18 months. There
have been about 200 so far. He expressed hope that there will be
sufficient information for legislators by the end of the session. In
addition, AHFC wants to find out what areas are using the program,
what areas are not, and why. The funds are allocated by region, so
Anchorage and Fairbanks cannot sweep up all of the money.
3:46:27 PM
CO-CHAIR MILLETT asked if, after the rating is done on a house, there
is an opportunity to talk with homeowners about how to pay for
improvements.
3:46:59 PM
MR. BUTCHER said yes. Initially, AHFC focused on educating residents
about the program; however, at this point it is time to do more
advertising about how to use the loan program to get the
weatherization work done.
3:47:57 PM
MR. BOLLING added that AHFC makes an effort to let people know in
advance that for the rebate program, cash is required up-front.
Otherwise, applicants are directed to the weatherization program.
3:48:33 PM
CO-CHAIR MILLETT then asked for the current interest rate on the loan
program.
3:48:41 PM
MR. BUTCHER replied about 7 percent.
3:48:54 PM
CO-CHAIR EDGMON observed that is a higher interest rate than available
through conventional financing.
3:49:00 PM
MR. BUTCHER opined an applicant probably could not get a loan cheaper
for small materials. In addition, it is easy to qualify.
3:49:26 PM
CO-CHAIR MILLETT asked for the default rate.
3:49:36 PM
MR. BUTCHER said of 104 loans made, 15 have been paid off, and there
are no defaults.
3:49:56 PM
REPRESENTATIVE JOHANSEN asked for more information on when the funds
not used in Juneau will be re-allocated.
3:51:14 PM
MR. FAUSKE answered that AHFC will decide in the next few weeks;
however, there will be an effort to determine why the money has not
been used prior to moving it to another region.
3:51:51 PM
MR. BUTCHER noted that grants are renewed in March and April; each
weatherization contractor and housing authority must show its
activities for the last year and discuss next year.
3:52:24 PM
REPRESENTATIVE TUCK expressed his interest in the demographics that
can affect applicants. For example, he has a constituent who could
benefit from lower energy costs, but he is in foreclosure and could
not participate in the rebate or loan program.
3:53:57 PM
MR. BUTCHER offered to talk with Representative Tuck's office on this
case as that information is not going to be available until spring or
early summer.
3:54:32 PM
REPRESENTATIVE TUCK shared that Alaskans are happy with AHFC, but are
not interested in getting a second loan. Also, they are reluctant to
spend a lot of money in order to gain one step in the rating system.
3:55:56 PM
CO-CHAIR MILLETT asked whether AHFC is in the position to be a debt
collector if a voucher system is put in place.
3:56:29 PM
MR. FAUSKE acknowledged that AHFC has had a lot of discussion on how
the voucher would be set up. He is troubled by the "grant side"
because there are 22,000 residents who have completed the program as
it is. Furthermore, he pointed out that if an applicant can qualify
for a voucher, he/she could qualify for a loan. Other problems may
arise if AHFC is making fiat sole-source performance arrangements with
contractors, because the contractors must guarantee the improved
energy rating. These guarantees may become a risk to the contractors'
bonding. He opined some of these problems can be worked out, but
perhaps not all. Mr. Fauske re-stated AHFC's intent to help
residents, especially with energy savings.
3:59:21 PM
CO-CHAIR MILLETT questioned whether the committee is considering huge
changes for a few people whose situations could be dealt with on an
individual basis.
4:00:17 PM
MR. FAUSKE pointed out that AHFC is contacting banks about processing
the collections on the 104 loans already processed. It is a similar
issue with vouchers. He offered his assistance to Representative
Tuck's constituent.
4:01:36 PM
REPRESENTATIVE TUCK clarified that his office is looking at options
for a bill, but he would not discuss the intent of the bill before it
comes before the committee.
4:02:44 PM
REPRESENTATIVE PETERSEN has heard that "they're out of money in that
fund." He asked whether there is a need to allocate more money.
4:03:31 PM
MR. FAUSKE responded that AHFC did not submit a funding request this
year; however, interest in the program is spreading. Furthermore, the
energy rater waiting list is beginning to grow again, and he expressed
his concern that in 2011 the program would have to stop. He re-stated
that the legislature must decide whether the program should continue
and, if so, a smaller increment would be needed this current year to
keep the program going. Mr. Fauske said his personal feeling was that
the program should be continued.
4:04:48 PM
REPRESENTATIVE PETERSEN agreed. He encouraged AHFC to submit an
appropriation request to the legislature.
4:05:11 PM
MR. BUTCHER acknowledged that the finance committee and the governor's
office are asking for an estimate on the amount AHFC would need for FY
2011. At this point, AHFC is assuring applicants that there is money
available for the program.
4:06:37 PM
CO-CHAIR MILLETT asked whether other cold climate states were
participating in energy efficiency and weatherization programs.
4:07:13 PM
MR. FAUSKE stated that state governments in all 50 states have been
contacted by a representative from the Obama Administration for
information on this subject. He said, "AHFC is the shining star ...
in terms of success, monies toward the program, and the development of
our software." Other states, such as Arizona are doing a good job
dealing with cooling environments.
4:08:05 PM
MR. BUTCHER added that in 2008, Alaska appropriated considerably more
funds for weatherization than the total appropriation to states from
the federal government. However, federal support is increasing.
4:09:04 PM
MR. FAUSKE described the information AHFC provided to the federal
government.
4:10:27 PM
CO-CHAIR EDGMON referred to provisions in HB 305 that call for a
consolidation of energy components and services in state government.
He then asked for comments on the proposed department of energy, and
whether AHFC's position as the federal energy agency for the state
presents a problem.
4:12:37 PM
MR. BUTCHER said the creation of a department of energy is a policy
decision to be made by the governor and the legislature. There are
two issues to be noted: (1) energy efficiency programs are very close
to the Building Energy Efficiency Standard (BEES) in statute that
affect the AHFC mortgage program; (2) AHFC pays its employees from
mortgage programs receipts, and a transfer to a department of energy
would mean salaries would be paid from the general fund. Regarding
its position as the state's energy agency, he said that happened when
AEA was going through many changes; however, AHFC works well with AEA.
4:14:55 PM
REPRESENTATIVE JOHANSEN asked whether there was a distinction between
using AHFC's dividend to the state for capital projects or for
operating expenses.
4:15:17 PM
MR. BUTCHER said yes. He explained that the AHFC dividend paid to the
state is in statute; in fact, when that became statute, AHFC's rating
with Standard & Poor was increased because it showed that AHFC would
be paying 75 percent of its adjusted change of net assets to the
state. Furthermore, the increase in rating allowed AHFC to bond "for
cheaper paper, which allows us to have lower interest rates." Mr.
Butcher further explained that AHFC is legally separate from the state
so that none of the debts of AHFC can become debts of the state. He
opined a change [to a department of energy] would "put that in kind of
a gray area because we'd have the governor making decisions on the
spending of our funds away from our board."
4:16:33 PM
MR. FAUSKE clarified that the general obligation and debt of AHFC is
the debt of the corporation, not of the state. The legislature has
been very good about recognizing that separation.
4:17:18 PM
REPRESENTATIVE JOHANSEN surmised that once the dividend is paid to the
state, there are strings tied back to the corporation, and there are
restrictions on how the state spends the money.
4:17:52 PM
MR. BUTCHER stated the dividend is treated as cash, and most years the
money is used to fund AHFC's capital projects; however, in past years
the excess has been spent on the Department of Environmental
Conservation Village Safe Water program, Medicaid, or debt retirement.
4:18:19 PM
REPRESENTATIVE JOHANSEN observed the state can fund positions with
that money.
4:18:30 PM
MR. BUTCHER said yes.
4:18:42 PM
CO-CHAIR MILLETT has heard that management of the Department of Energy
(DOE) federal money is working for AHFC, but not necessarily for the
users. She asked if there was there a specific reason why the energy
rebate and weatherization programs could not be managed by AEA, or
transferred over to a department of energy.
4:19:37 PM
MR. BUTCHER pointed out that residential funding is under AHFC and
commercial funding is under AEA by statute. In addition to requiring
a change in statute, there is the problem of the relationship between
the residential efficiency program and the work done in the mortgage
program.
4:20:17 PM
CO-CHAIR MILLETT asked whether AHFC could "still be able to do that
work if those two programs were housed under the department of
energy." She clarified her question and said:
Could they administer these programs as well as you if
they're ... if the statute allowed them to?
4:20:57 PM
MR. FAUSKE said no. Although AEA "is a fine organization," AHFC has a
distinct interest in its mortgages because it cannot purchase a
mortgage unless the energy efficiency standards are met. Mr. Fauske
expressed his concern about explaining to a rating agency that the
responsibility for the standards is held by "a group over there." He
stressed that AHFC has a unique relationship with its core business.
He then cautioned that AHFC raises money through bonding and business
activity, and a perception that AHFC's dividend would fund operational
activities "has a different take on Wall Street," because AHFC cannot
sell bonds to fund operations, except on a limited basis.
HB 296-ENERGY EFFICIENCY BONDS; LOANS; FUND
[Contains discussion of HB 305]
4:23:11 PM
CO-CHAIR EDGMON announced the next order of business would be HOUSE
BILL NO. 296, "An Act authorizing and relating to the issuance of
bonds by the Alaska Housing Finance Corporation; establishing the
Alaska energy efficiency revolving loan fund and relating to the fund;
authorizing municipalities and the State of Alaska to borrow money
from the Alaska Housing Finance Corporation for the purposes of the
Alaska energy efficiency revolving loan fund; and providing for an
effective date."
4:23:34 PM
DAN FAUSKE, CEO/Executive Director, Alaska Housing Finance Corporation
(AHFC), Department of Revenue (DOR), informed the committee HB 296 is
an act authorizing and relating to the issuance of bonds by AHFC to
establish an Alaska energy efficiency revolving fund. He noted that
the bill was a result of discussions with the administration, the
Department of Transportation & Public Facilities (DOT&PF), and two
agencies of the Department of Commerce, Community, & Economic
Development (DCCED), the Alaska Industrial Development & Export
Authority (AIDEA) and the Alaska Energy Authority (AEA). The agencies
met to discuss how to deal with the $28.3 million received from the
American Recovery and Reinvestment Act of 2009 (ARRA) for the state
energy program. Of that, $18 million is going to state facilities
through DOT&PF and AHFC, and the bill would leverage this money
through performance based contracting to $250 million. Mr. Fauske
noted that DOT&PF has utilized this process previously. He explained
that contractors assess and guarantee that the energy savings
resulting from the retro-fit of public buildings would pay for the
debt service on the bonds. Thus, the contractors are "on the hook" to
meet that standard. Basically, general fund monies that are currently
paying for utilities are saved and put towards paying the loan.
Alaska Housing Finance Corporation's position is that spending $18
million is not as effective as leveraging the funds. He noted that
the state owns many facilities and leveraging the funds would create a
revolving loan fund so the money will continue to be loaned out as the
debt is paid. Mr. Fauske compared the bill to the use of the tobacco
settlement money; rather than an annual increment, the money was
secured by bonds that are paying off very well. Under this bill, the
bonds would be AHFC general obligation bonds and the paying agencies
would be the state agencies utilizing the program, in a manner similar
to the purchase of the Atwood Building, and the loans to the
University of Alaska (UA) to build dorms.
4:27:31 PM
REPRESENTATIVE TUCK asked whether performance based contracting was
part of the former revolving loan program.
4:27:56 PM
MR. FAUSKE said no.
4:28:08 PM
REPRESENTATIVE TUCK asked who would determine the contractor on state
projects.
4:28:21 PM
MR. FAUSKE responded DOT&PF and the school districts would decide.
4:28:43 PM
MR. BUTCHER clarified that AHFC would administer the program. In
addition, because the bill would create a revolving loan fund and
funds would remain available in perpetuity as the loans are repaid,
there is not a question of whether funds would be available for future
projects. Furthermore, AHFC is comfortable that DOT&PF would work
with the other departments that own buildings to establish a
prioritized list of public buildings that are ready to have work done
now. AHFC would determine a list of priorities for school district
and municipal projects.
4:30:18 PM
CO-CHAIR EDGMON mentioned another provision of HB 305 that requires
AEA to establish an energy index database and that further revises
current law regarding energy audits. He asked whether the energy
standards required by HB 305 would make the program established by HB
296 more effective.
4:31:05 PM
MR. BUTCHER relayed that representatives from affected departments
advised that gathering the information needed to create an energy
index would cost "in the millions." Furthermore, as the program
established by HB 296 evolves, this information would be gathered by
energy auditors during the process. Also, he was told by
representatives at DOT&PF that they are already aware of the priority
order of buildings with energy efficiency needs.
4:32:16 PM
CO-CHAIR EDGMON asked whether the different agencies working with
DOT&PF have different standards.
MR. BUTCHER clarified that the agencies have the same standards;
however, there is the question of whether to develop an index at a
high cost, before any work is done.
CO-CHAIR EDGMON observed that one of the goals of the energy policy
bill is to increase the overall efficiency levels by 15 percent
between 2010 and 2020. He asked what impact this bill would have on
the approximately 700 state buildings administered by DOT&PF.
4:34:01 PM
MR. BUTCHER stated that a portion of the appropriation to the state
energy program (SEP) is being used to determine a benchmark for
improving energy efficiency on the "residential side." Regarding
public facilities, he deferred the question to DOT&PF or the
Department of Administration (DOA).
4:34:39 PM
JACK KRIENHEDER, Chief Policy Analyst, Office of the Director, Office
of Management & Budget (OMB), Office of the Governor, informed the
committee HB 296 is a continuation of a program DOT&PF has in place.
He offered to provide information from DOT&PF on 16 state buildings
that have had performance contract energy upgrades. This data would
reveal the energy savings per building. Mr. Krienheder told the
history of the DOT&PF program. In response to Representative Tuck, he
said that historically, the energy performance contract firm does the
initial audit and provides a report of the recommended work. For the
ongoing DOT&PF program, the energy performance contractor was Siemens
Energy. The energy performance contractor then collects bids from
local subcontractors to do the work similar to deferred maintenance
contracts that use local hire.
4:38:48 PM
REPRESENTATIVE TUCK surmised that Siemens Energy is a professional
auditor for commercial facilities that would oversee the work.
4:39:07 PM
MR. KRIENHEDER said correct. He added that Siemens Energy would do
the audit, submit a proposal, guarantee the savings, and monitor the
project after, to make sure that the projected energy savings are
being realized.
4:39:30 PM
REPRESENTATIVE JOHANSEN asked for further information about the DOT&PF
program.
4:39:56 PM
MR. KRIENHEDER relayed that the program was modeled after a similar
energy savings program in Washington. The first energy performance
contract was signed 4 to 5 years ago, and about 16 buildings have been
improved since then. In further response to Representative Johansen,
he advised that the performance contractor does an initial energy
audit and predicts the savings over a certain payback period. The
financing aspect can be handled in different ways. The work done
includes new lighting, upgrades to heating controls, improvements to
insulation, and general projects to reduce the energy use of the
building. He pointed out that for these projects DOT&PF has been
borrowing money from DOR, or through the contractor; HB 296 proposes
to use AHFC bonds instead, in order to get a lower interest rate and
to simplify the process. Furthermore, the energy savings pay for the
loan payments until the loan is paid off, and then the full savings
begin to accrue to the state.
4:44:19 PM
CO-CHAIR MILLETT asked whether the performance standards are being met
and whether there are savings.
4:44:44 PM
MR. KRIENHEDER said yes. The savings are guaranteed by the
performance contractor; thus if the targets are not met the contractor
must pay the state. In fact, the savings targets have been met and
exceeded. The contractor's guarantee is on the quantity of energy
saved, but the dollar savings fluctuates with the cost of energy. He
offered to provide information from DOT&PF on the actual savings.
4:46:32 PM
REPRESENTATIVE JOHANSEN observed the zero fiscal note is incorrect.
4:46:47 PM
MR. BUTCHER assumed that after the loan is paid off the savings would
go to the department, thus the fiscal note should be indeterminate.
4:47:32 PM
MR. KRIENHEDER clarified that the intent of the fiscal note was to
address the cost to DOT&PF of performing this program. Personnel
would be hired for the management of the performance contracts;
however, these positions would be paid for from the federal ARRA
funds. Regarding energy savings, the amount is too speculative to be
determined.
4:48:41 PM
REPRESENTATIVE TUCK asked whether the energy savings goes directly
back to the revolving loan fund. Further, he asked if there is
interest or other benefits paid to AHFC.
4:49:34 PM
MR. BUTCHER responded that AHFC is not going to operate at a deficit,
but the cost of the loan has not been determined. There would be some
interest charged at a low rate.
REPRESENTATIVE TUCK asked for the meaning of "sovereign immunity
defense."
4:50:32 PM
MR. KRIENHEDER understood that language is needed to secure the loan
from AHFC.
4:50:54 PM
REPRESENTATIVE TUCK then asked whether AHFC would verify the proposal,
and how performance contractors are "on the hook."
4:51:49 PM
MR. BUTCHER expressed his belief that the energy department at AHFC
would look at the contract. Regarding energy performance contracts,
other states have had success making the energy savings part of the
contract. In most cases, if the energy savings exceeds the estimate,
the excess goes to the contractor; however, this aspect is not part of
the DOT&PF contracts.
4:52:56 PM
MR. KRIENHEDER added that performance contractors are on the hook
financially because they have to provide a bond.
4:53:23 PM
REPRESENTATIVE TUCK surmised that it is in the municipality's or
school district's best interest to get bids from more than one
contractor in order to get accurate numbers. He then asked whether in
the case of higher savings, the loan would be paid off quicker, or if
the additional savings would benefit the municipality.
4:54:37 PM
MR. KRIENHEDER explained that contracts have varying terms; in fact,
some do provide for shared savings to be split. He understood that
DOT&PF's contract with Siemens Energy did not have a shared savings
arrangement and additional savings would go to the state. He said he
would confirm whether the loan terms were fixed and the loan payment
amount would stay the same; however, in the recent past, the
additional savings were used to avoid higher costs due to the spike in
oil prices.
4:57:46 PM
[HB 296 was held over.]
ADJOURNMENT
4:58:26 PM
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 4:58 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 296 SEP bonds Sponsor Statement.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |
| Energy Savings Performance Contracting Summary-DOT.pdf |
HENE 2/9/2010 3:00:00 PM |
|
| ARRA Energy funds, SEP plan.pdf |
HENE 2/9/2010 3:00:00 PM |
|
| HB0296-1-1-011910-REV-N.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |
| HB0296-2-1-011910-DOT-N.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |
| Agenda 02092010.PDF |
HENE 2/9/2010 3:00:00 PM |
|
| House Energy AHFC powerpoint.ppt |
HENE 2/9/2010 3:00:00 PM |
|
| AM#1 HB296.pdf |
HENE 2/9/2010 3:00:00 PM |
HB 296 |
| AM#2 HB296.pdf |
HENE 2/9/2010 3:00:00 PM HENE 2/23/2010 3:00:00 PM |
HB 296 |