02/07/2017 10:15 AM House ENERGY
| Audio | Topic |
|---|---|
| Start | |
| HB81 | |
| Presentation: Alaska Affordable Energy Strategy | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 81 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON ENERGY
February 7, 2017
10:21 a.m.
MEMBERS PRESENT
Representative Adam Wool, Chair
Representative Ivy Spohnholz, Vice Chair
Representative Matt Claman
Representative Dean Westlake
Representative DeLena Johnson
Representative Jennifer Johnston
Representative George Rauscher
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 81
"An Act making an entity that is exempt from federal taxation
under 26 U.S.C. 501(c)(3), (4), (6), (12), or (19) (Internal
Revenue Code) and a federally recognized tribe eligible for a
loan from the Alaska energy efficiency revolving loan fund;
relating to loans from the Alaska energy efficiency revolving
loan fund; and relating to the annual report published by the
Alaska Housing Finance Corporation."
- HEARD & HELD
PRESENTATION: ALASKA AFFORDABLE ENERGY STRATEGY
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: HB 81
SHORT TITLE: AK ENERGY EFFICIENCY LOANS: ELIGIBILITY
SPONSOR(s): REPRESENTATIVE(s) KREISS-TOMKINS
01/25/17 (H) READ THE FIRST TIME - REFERRALS
01/25/17 (H) ENE, FIN
01/31/17 (H) ENE AT 10:15 AM CAPITOL 17
01/31/17 (H) Heard & Held
01/31/17 (H) MINUTE(ENE)
02/07/17 (H) ENE AT 10:15 AM CAPITOL 17
WITNESS REGISTER
BERRETT WILBER, Staff
Representative Jonathan Kreiss-Tomkins
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Presented the proposed Amendment A.4 to HB
81 on behalf of the bill sponsor, Representative Kreiss-
Tompkins.
CADY LISTER, Chief Economist
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint titled "Alaska
Affordable Energy Strategy" and answered questions during
discussion of HB 81.
STACY SCHUBERT, Director
Governmental Affairs & Public Relations
Alaska Housing Finance Corporation
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Answered questions during discussion of HB
81.
KATIE CONWAY, Government Relations Manager
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint titled "Alaska
Affordable Energy Strategy."
CADY LISTER, Chief Economist
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Presented a PowerPoint titled "Alaska
Affordable Energy Strategy" and answered questions during
discussion of HB 81.
NEIL MCMAHON, Planning Manager
Alaska Energy Authority (AEA)
Department of Commerce, Community & Economic Development
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the PowerPoint
presentation.
ACTION NARRATIVE
10:21:30 AM
CHAIR ADAM WOOL called the House Special Committee on Energy
meeting to order at 10:21 a.m. Representatives Wool,
Spohnholtz, Rauscher, Claman, Johnston, and Westlake were
present at the call to order. Representative Johnson arrived as
the meeting was in progress.
HB 81-AK ENERGY EFFICIENCY LOANS: ELIGIBILITY
10:21:53 AM
CHAIR WOOL announced that the first order of business would be
HOUSE BILL NO. 81, "An Act making an entity that is exempt from
federal taxation under 26 U.S.C. 501(c)(3), (4), (6), (12), or
(19) (Internal Revenue Code) and a federally recognized tribe
eligible for a loan from the Alaska energy efficiency revolving
loan fund; relating to loans from the Alaska energy efficiency
revolving loan fund; and relating to the annual report published
by the Alaska Housing Finance Corporation."
10:22:20 AM
REPRESENTATIVE SPOHNHOLZ moved to adopt Amendment A.4, labeled
30-LS0353\A.4, Nauman, 2/6/17, which read:
Page 1, line 1:
Delete "an entity that is"
Insert "certain entities that are"
Page 1, line 2:
Delete "a federally recognized tribe"
Insert "federally recognized tribes"
Page 5, line 8, following "Code)":
Insert ", but does not include an entity
organized with the primary purpose of owning,
operating, managing, or controlling a plant or system
for furnishing electric service by generation,
transmission, or distribution"
CHAIR WOOL objected for discussion.
10:22:57 AM
BERRETT WILBER, Staff, Representative Jonathan Kreiss-Tomkins,
Alaska State Legislature, explained that the proposed Amendment
A.4 resulted from discussions with the Alaska Housing Finance
Corporation (AHFC) and the Alaska Energy Authority (AEA). She
pointed out that 501(c)(12) non-profit organizations included
electric cooperatives. She reported that AHFC had expressed a
lack of expertise in its loan vetting process to offer energy
efficiency loans to power generators for the purpose of power
generation and distribution. She offered her belief that a
conceptual amendment could allow electric cooperatives to
receive efficiency loans for building envelope efficiencies, but
not allow for distribution to the power grid.
REPRESENTATIVE WESTLAKE asked for clarification that this was
specific to the efficiencies to each individual building.
MS. WILBER replied, "yes, that's correct in my estimation."
10:25:22 AM
REPRESENTATIVE WESTLAKE offered a conceptual amendment to the
proposed Amendment A.4, at the end of line 12, which read:
except when used for building end-use energy
efficiency improvements unrelated to the generation,
distribution or transmission of power or recovered
heat.
REPRESENTATIVE WOOL reiterated that the proposed conceptual
amendment to proposed Amendment A.4 would make funds available
for building envelope energy efficiencies, but not for power
generation.
REPRESENTATIVE WESTLAKE expressed his agreement and asked that
AEA further address the issue.
10:27:32 AM
CADY LISTER, Chief Economist, Alaska Energy Authority (AEA),
Department of Commerce, Community & Economic Development, stated
that AEA supported the proposed conceptual amendment. She
explained that AEA had the Power Project Loan Fund program which
offered financing for generation and transmission of energy
systems projects, as well as some efficiency measures. She
offered the belief that it was important to maintain lending to
the power generators, especially in Rural Alaska. She reported
that AEA staff had the technical capacity to assess and evaluate
the appropriateness and legality of a project. She explained
that there were many Environmental Protection Agency regulations
regarding the use of diesel fuel as prime power, that these
regulations changed often, and that the State of Alaska had
special waivers and exemptions.
CHAIR WOOL asked if AEA offered loans for building envelope
energy efficiency or simply for power distribution, generation,
and transmission. He opined that augmenting the AHFC loans for
efficiency would dovetail with the AEA program.
MS. LISTER offered her belief that it would dovetail.
REPRESENTATIVE SPOHNHOLZ asked for an at-ease for language
clarification to the proposed conceptual amendment in order to
avoid any unintended consequences.
10:30:39 AM
The committee took an at-ease from 10:30 a.m. to 10:33 a.m.
10:33:01 AM
CHAIR WOOL explained that the proposed conceptual amendment to
proposed Amendment A.4 stated that the loans could be used for
energy, building envelope, or consumption efficiency but not for
any power distribution, transmission, or generation.
REPRESENTATIVE SPOHNHOLZ reiterated the proposed conceptual
amendment, stating that it "does not include an entity organized
for the purpose of owning, operating, managing, or controlling a
plant or system for furnishing electric service by generation,
transmission, or service, except for the purposes of energy
efficiency of the building."
CHAIR WOOL added "or buildings that they may own."
10:34:19 AM
REPRESENTATIVE KREISS-TOMKINS, in response to Representative
Westlake, expressed his support for the proposed conceptual
amendment and declared that it was consistent with the intent to
improve energy efficiency.
[There being no objection, the proposed conceptual amendment to
proposed Amendment A.4 was adopted.]
10:34:42 AM
CHAIR WOOL removed his objection to Amendment A.4. There being
no further objection, Amendment A.4, as amended, was adopted.
10:35:24 AM
REPRESENTATIVE RAUSCHER moved to adopt Amendment A.2, labeled
30-LS0353\A.2, Nauman, 2/1/17, which read:
Page 5, line 14, following "section,":
Insert "(1)"
Page 5, line 15, following "enterprise":
Insert ";
(2) the corporation may not make a loan
under this section to a tax exempt entity, federally
recognized tribe, or regional housing authority if, at
the time of making the loan, the total amount of
outstanding loans under this section to tax exempt
entities, federally recognized tribes, and regional
housing authorities exceeds 10 percent of the total
amount of bonds the corporation is authorized to issue
to secure loans under this section."
CHAIR WOOL objected for discussion.
REPRESENTATIVE RAUSCHER explained that proposed Amendment A.2
would add language to limit the loan funds available to tax-
exempt entities, federally recognized tribes, or regional
housing authorities. He allowed that although the proposed
amendment stated a limit of 10 percent of the total amount, he
acknowledged that there had been discussion to increase this
amount to 30 percent. He stated that the limit would preserve
the loan funds available for use by municipal governments, as
intended by the original legislation in 2010.
10:37:19 AM
REPRESENTATIVE CLAMAN questioned the intent of the proposed
amendment, as testimony indicated that the existing fund had
only issued one loan in four years. He asked why there should
be a restriction on loan amounts when there was not an existing
demand.
REPRESENTATIVE RAUSCHER explained that, although the purpose of
proposed HB 81 was to generate a source for newer loans, it
should allow funds for the original intent of the program. He
stated that "just because they weren't used, doesn't mean they
won't be." He suggested that opening up use could drain and
deplete the fund, so that there would no longer be money
available for its original intent.
REPRESENTATIVE SPOHNHOLZ opined that the original legislation
still allowed for a priority to the originally intended
beneficiaries. She stated that the proposed bill was "widening
the net" and not putting non-profits in a position "of
essentially trumping pubic agencies for the benefit of these
services." She declared that this was an attempt to reduce
energy costs across the state and be more efficient with our
resources, especially as many of the non-profits were funded
through state government. She suggested that proposed Amendment
A.2 was "a solution in search of a problem."
CHAIR WOOL asked for AHFC to address the issue.
10:40:27 AM
STACY SCHUBERT, Director, Governmental Affairs & Public
Relations, Alaska Housing Finance Corporation, Department of
Revenue, stated that AHFC would be able to implement proposed
Amendment A.2, but that AHFC was neutral and had no preference.
CHAIR WOOL reflected that, in the history of the program, there
had only been two applicants resulting in one loan, and asked if
it was foreseeable for an increase in applications by those
tribal entities and non-profits addressed through proposed HB
81, or an increase in applications from public entities as the
availability of grants had decreased.
MS. SCHUBERT relayed that the original legislation allowed for
$250 million in funding, and that, should there be greater
necessity for funds, AHFC could ask the Alaska State Legislature
for an increase to the availability of loan funds.
REPRESENTATIVE CLAMAN asked if any municipalities had complained
about a lack of ability to apply for these funds.
REPRESENTATIVE RAUSCHER replied, no.
REPRESENTATIVE CLAMAN asked if any municipality had contacted
Representative Rauscher with concerns for the availability of
loan funds.
REPRESENTATIVE RAUSCHER replied, no.
10:42:54 AM
REPRESENTATIVE JOHNSON, reflecting on her time working in
municipal government as a mayor, acknowledged that she was not
aware of this loan fund. She offered her belief that this lack
of awareness could be wide spread, and, as a municipal
representative, she would want "a chance at the pot of money."
She suggested that most people were not aware of this loan fund.
CHAIR WOOL offered his belief that $250 million of bonding
ability was a large amount of money that was currently
underutilized. He reminded the committee that AHFC had stated
that more money could be requested if all of the loan fund was
committed. He opined that loans to all the aforementioned
entities would be a good thing, as energy efficiency and less
fuel consumption was a goal. He acknowledged that use of the
entire fund could be a problem, but "maybe not such a bad
problem."
10:45:03 AM
REPRESENTATIVE CLAMAN stated that he opposed proposed Amendment
A.2. He expressed his agreement with Representative Spohnholz
that this was "a solution in search of a problem." He opined
that the original intent of the legislation was to resolve
energy efficiency issues with funding, and limiting access to
the funds was a disservice to the communities.
10:46:50 AM
REPRESENTATIVE JOHNSTON asked about negotiation to the
percentage of the total amount of the bonds available to the
aforementioned entities.
REPRESENTATIVE RAUSCHER in response, explained that his intent
was to ensure there was money for the original intent of the
fund, and "not to limit anybody's ability to make any kind of
efficiency loans."
REPRESENTATIVE JOHNSTON offered her support for proposed
Amendment A.2, as there was a changing environment, and that
many public buildings would require greater efforts and more
money. She suggested that an increase to 30 percent of the
total amount of bonds was "a rather large number" and that it
was a good compromise to allow for the intent of the original
language.
REPRESENTATIVE RAUSCHER offered to renegotiate the percentage.
CHAIR WOOL allowed that there could also be renegotiation if all
the funds were depleted.
REPRESENTATIVE JOHNSON offered her support for proposed
Amendment A.2, stating that these were public buildings in the
public trust, paid for with public monies, and the fund had been
originally intended for public monies to be borrowed and paid
back. She stated that the original intent was fulfilling the
public trust, and that the proposed changes were enhancing
buildings in the private, non-profit sector.
CHAIR WOOL offered his belief that the proposed amendment did
not address privately owned buildings, only tribal entities and
non-profits.
REPRESENTATIVE KREISS-TOMKINS, in response, stated that
technically non-profit organizations were private, although they
had to satisfy public benefit and a public good.
REPRESENTATIVE JOHNSON clarified that a non-profit organization
was a private entity.
10:50:36 AM
The committee took a brief at-ease.
10:52:50 AM
CHAIR WOOL brought the committee back to order. He declared
that the objection to proposed Amendment A.2 had been
maintained.
10:53:00 AM
REPRESENTATIVE RAUSCHER offered a conceptual amendment to
proposed Amendment A.2 which would change the percentage of the
total amount of bonds on line 10 from 10 percent to 30 percent.
10:53:44 AM
REPRESENTATIVE CLAMAN stated that, although he did not oppose
the proposed conceptual amendment, he maintained his objection
to proposed Amendment A.2.
10:54:09 AM
A roll call vote was taken. Representatives Rauscher, Johnson,
and Johnston voted in favor of Amendment A.2. Representatives
Claman, Spohnholz, and Wool voted against it. Therefore,
Amendment A.2 failed the House Special Committee on Energy by a
vote of 3 yeas - 3 nays.
10:55:02 AM
The committee took a brief at-ease.
10:55:41 AM
CHAIR WOOL stated that proposed Amendment A.2 did not pass.
10:55:52 AM
CHAIR WOOL asked if there was consensus for passage of proposed
HB 81, as amended, out of committee.
REPRESENTATIVE CLAMAN reiterated that the original intent of the
proposed bill was to get energy efficient loans into the
community, and it was never intended to be specific to any
particular group. He pointed out that the municipalities had
not applied for the loans. He offered his belief that proposed
HB 81, as amended, was "100 percent consistent with the original
goal and intent of the original legislation which is to get
funds available for energy efficiencies throughout Alaska." He
declared his support of the bill.
REPRESENTATIVE JOHNSON stated that she was not in favor of
passing the bill out of committee. She reiterated that the fund
was a large amount of public funds for the public trust and
administered by a public entity. She offered her belief that
the intent of the bill was to further allow public buildings and
municipalities to upgrade facilities, so it would save public
money.
REPRESENTATIVE RAUSCHER expressed his agreement with
Representative Johnson.
10:57:51 AM
CHAIR WOOL stated that AHFC was a state entity which loaned
money to private individuals to buy homes and that this money
was also bonded for public buildings. He said that the proposed
bill opened the funding up to other entities as the fund had
been barely used although, he acknowledged, many municipalities
may not have been aware of the fund. Chair Wool said that he
would hold over HB 81.
10:58:44 AM
The committee took a brief at-ease.
^Presentation: Alaska Affordable Energy Strategy
Presentation: Alaska Affordable Energy Strategy
11:00:48 AM
CHAIR WOOL announced that the next order of business would be a
presentation on the Alaska Affordable Energy Strategy.
11:01:05 AM
KATIE CONWAY, Government Relations Manager, Alaska Energy
Authority (AEA), Department of Commerce, Community & Economic
Development, introduced a PowerPoint titled "Alaska Affordable
Energy Strategy," and noted that the presentation would only
focus on this strategy and not on any other AEA programs. She
shared that, although power generation in the state was often
taken for granted, the reality was that the energy systems
generating and distributing the power were complicated, required
a lot of work to sustain and, for those not connected to a grid,
lacked back-up. She reminded that communities relied on heat
and power, and that affordable energy was a fundamental need.
She directed attention to slide 3, "Bulk Fuel, Generation,
Distribution" which she characterized as the energy
infrastructure. She discussed slide 4, "Energy infrastructure
is critical infrastructure," and spoke about the need for
continuous improvement and replacement. She reported that the
yearly capital cost to replace existing electricity generation
and bulk fuel storage in rural communities was more than $30
million. She stated that more than $1 billion federal and state
dollars had been invested during the past 15 years in energy
projects outside the Railbelt. Pointing to slide 5, "The future
points to more dynamic funding," she declared that, although the
need to continually invest remained constant, the availability
of public funding was decreasing and communities and utilities
had to find other ways to deliver safe, reliable, stable, and
affordable energy services. She stated that state government
needed to ensure the framework was in place to maximize federal
dollars, encourage private sector investment, prepare
communities and utilities for debt-financing solutions rather
than relying exclusively on public funding to implement
projects, ensure proper project selection given the unique
circumstances of any individual community, and provide technical
assistance and consumer protection. She declared that the
Alaska Affordable Energy strategy offered these solutions. She
suggested that this strategy was a framework for choosing the
way critical energy programs and cost-effective services were
provided to the non-Railbelt communities and utilities. She
addressed slide 7, "In 2014, Senate Bill 138 tasked AEA to"
develop an infrastructure to deliver more affordable energy to
areas of the state which did not have direct access to a North
Slope natural gas pipeline. She emphasized that the Affordable
Energy strategy applied only to non-Railbelt areas. She pointed
out that AEA had also been directed to consider existing state
energy policy, which included the 15 percent by 2020 energy
efficiency, and 50 percent by 2025 renewable energy goals which
had been established in 2010. She listed some key points, which
included: only non-Railbelt regions made up the study area; the
project was a data and research based project conducted over two
years; there is not a list of capital projects; and, AEA focused
on improvement to the decision making process and expansion for
the availability of financing tools for energy projects. She
pointed out that although the presentation would be linear for
ease of explanation, it should be considered as an
interconnected web. She stated that the benefits of these
recommendations could be statewide, as every dollar saved
allowed for more to be done with less, which was especially
relevant given the current fiscal crisis in Alaska, slide 8.
11:09:02 AM
MS. CONWAY moved on to slide 9, "Study area communities," and
stated that there was a wildly variable set of circumstances
influencing energy costs in the study area. She shared that the
median community size within the study area was 300 people, and
that 76 percent of the study area communities were not connected
by road or marine highway. She reported that the median
electric rate within the study area, before PCE (Power Cost
Equalization), was $0.62 per kilowatt hour, and the median cost
of heating oil was $4.55 per gallon. She reminded that the
gallon equivalent of natural gas in Southcentral Alaska cost
less than $1 per gallon.
CHAIR WOOL asked what year the price of heating oil data
reflected.
MS. CONWAY replied that it was 2016.
MS. CONWAY returned to slide 10 and stated that implementation
of the Affordable Energy Strategy would improve project
selection and ensure that the most cost effective projects would
be done first; would diversify financing options; and, would
strengthen accountability through requirements and incentives
which encouraged best financial, managerial, and technical
practices. She relayed that AEA had considered more than 150
reports and studies over the past two years, as well as recently
completed regional energy plans and community vetted priorities.
She concluded by saying that the project commissioned specific
studies to fill in gaps and knowledge related to end use
efficiency, liquefied natural gas, fuel delivery and storage,
utility management structures, and barriers to private
investment in Rural Alaska. She noted that the strategy had
reviewed the entire energy system within the study area, and not
just AEA programs and services, and had built all the
information into the Alaska Affordable Energy model. She added
that this model allowed comparison of different energy
infrastructure options to be used to help communities and policy
makers better identify the most cost effective projects. She
noted that the use of "affordable" was interchangeable with
"cost effective" as the lowest cost option given the unique
circumstances of a specific place at a specific moment in time.
She declared that, although it was difficult to dramatically
lower costs, there were many opportunities for improving cost
effectiveness, especially for energy efficiencies. She stated
that many of the strongest opportunities for more affordable
energy were difficult to capture within the current system of
energy programs and services. She concluded with slide 13,
"There are no one-size-fits-all solutions."
11:13:24 AM
CADY LISTER, Chief Economist, Alaska Energy Authority (AEA),
Department of Commerce, Community & Economic Development, stated
that the Affordable Energy Strategy proposed an evidence-based
management framework to guide decision making which was based on
a foundation of collaboration and research. She reported that
the recommendations were organized into four categories, or
pillars, slide 14. The first pillar was identification of cost
effective projects, followed by financing those projects,
creating systems of accountability and sustainability, and
funding state energy programs. She shared that the goal of
these pillars was to support safe, reliable, stable, and
affordable energy, and that the recommendations were
interconnected and could influence multiple categories. She
declared that these built off the successes of the many past and
current energy programs while recognizing that the levels of
influence to local government decision making and action were
limited. She stated that each of the proposed solutions
employed at least one of the following mechanisms: direct
financing through grants, loans, or incentives; technical
assistance through the collection and sharing of data,
information analysis, evaluation, and consultation; and
requirements, such as mandates, regulations, and standards. She
addressed slide 15, "Research identified pain points in the
system and offers solutions to address them" and said that
barriers and risks were leading to higher cost energy. She
relayed that an expectation of grants in some communities had
led to the delayed implementation of beneficial projects, as
well as underdevelopment of the administrative and financial
structures necessary to access the financing. She shared that
the method of state and federal funding had also led to project
development based on funding availability rather than the actual
need. She pointed out that the expected performance and
economic life of energy projects was sometimes not realized, as
maintenance and operations of energy systems required a certain
level of technical, business, and financial capacity and
expertise which was not always available at the local level.
She moved on to slide 16, and shared that there were a menu of
options to be considered, but, although not all the
recommendations were applicable in all situations, taken as a
whole the Affordable Energy strategy offered meaningful,
realistic, and achievable solutions.
11:16:46 AM
REPRESENTATIVE CLAMAN asked about the costs of heating oil and
kilowatt hours in rural communities compared to urban Alaska.
MS. LISTER replied that she did not have the cost per kilowatt
hour for all the urban communities, adding that there was a lot
of variability. She relayed that areas with access to natural
gas for heating had the lowest heating costs. She said that the
energy equivalent in Anchorage was less than $1 per gallon for
heating oil, and that Fairbanks was about 26 cents per kilowatt
hour.
CHAIR WOOL shared that his cost in Fairbanks was about 17 cents
per kilowatt hour.
MS. LISTER said that the population weighted average cost for
Fairbanks, Anchorage, and Juneau was about 16 cents per kilowatt
hour.
CHAIR WOOL asked about the aforementioned 3000 capital projects
reviewed.
MS. LISTER explained that the model developed to evaluate
potential projects in each community had relied on the best
available data from studies done over the years. She said this
data, along with socio-economic and population data, was used to
evaluate the opportunities to lower the cost of power for each
community.
11:20:51 AM
MS. LISTER said that AEA recommended that the state energy
policy be amended to include a goal that formalizes the
commitment for delivering critical energy programs and services
to ensure safety, stability, reliability, and affordability in
communities by 2030, slide 17. She pointed to slide 19,
"Recommendation A-1", which was identification of cost effective
projects. She said that the three recommendations for this
pillar were access to better community level data necessary to
make well informed decisions about energy projects and programs.
She reported that, although there was data available to
understand community goals, consumer needs, utility needs, and
environmental needs, there were still gaps to be filled to
better allow for decisions at the local level. She recommended
formalizing responsibility to collect and have publicly
accessible community level energy data as well as data for all
state energy programs, and to regularly update the Alaska
Affordable Energy model in order to provide guidance regarding
the cost effectiveness of energy infrastructure opportunities,
slide 20, "Recommendation A-2."
11:22:57 AM
MS. LISTER said that the strategy recommended codifying and
clarifying the work already done to ensure that the most
efficient and cost effective energy systems were being
identified and built. She said that the state will work with
communities seeking assistance to reduce energy costs to
identify, plan, and assist in financing energy projects and
programs, while first targeting PCE communities in order to
provide savings in these high cost areas. She produced slide
21, "Recommendation A-3," and stated that the goal was to
establish building energy codes for new residential and non-
residential construction and major renovation. She pointed out
that building to an efficient standard was cost effective, as it
saved energy throughout the life of the building and was less
expensive than retrofitting later. She declared that it made
sense for new buildings to be built with lower operational
costs, so as not to be a future financial burden.
11:24:51 AM
MS. LISTER addressed slide 22, "Financing cost-effective
projects" which included the five recommendations for improving
access to and expanding the types of financing tools available
to communities to better leverage non-state dollars and to
connect potential investors or lenders with bankable projects.
Slide 23, "Recommendation B-1" clarified a recommendation to
allow bulk fuel loan participants to purchase non-diesel fuels.
This program offered communities an easy to use, low cost
financing tool to purchase large quantities of petroleum fuels,
thereby reducing the per unit cost and reducing the risk of non-
payment to distributors. She added that this same program would
be a benefit to many communities with bio mass projects.
11:25:50 AM
CHAIR WOOL asked if bulk fuel purchases could only be diesel.
MS. LISTER replied that was correct, moved to slide 24,
"Recommendation B-2" and said that communities needed assistance
for accessing the funding opportunities, as often administrative
capacity was the limiting factor for securing existing financing
options for both grants and loans. She declared that access to
a one-stop-shop for financing could play an important role. She
referred to this one-stop-shop as the Community Energy Fund for
Alaska (CEFA). She explained that CEFA could be a funding
source and a matchmaker with other financers, and would be
accessible to municipalities, boroughs, utilities, and tribes,
among others. CEFA would be available for generation,
distribution, transmission, and demand side efficiency projects.
The use of these funds would require the State of Alaska to make
a determination that the project was a cost-effective strategy
for meeting the community's energy needs.
11:28:03 AM
MS. LISTER, in response to Representative Spohnholz, explained
that CEFA was Community Energy Fund for Alaska. She continued,
and said that access to financing assistance was important
because it maximized the leveraging of non-state dollars,
provided financing flexibility to serve the needs of
communities, and reduced transaction costs for both borrowers
and lenders. It would also help with the transition from grants
to loans.
MS. LISTER continued with slide 25, "Recommendation B-3," and
said that this would create a loan program with refund
provisions that rewarded project performance. Portions of the
loan for energy infrastructure would be refunded if the borrower
met objective standards for performance and reporting that would
help maintain the economic life of the infrastructure, and would
be an alternative to straight grant funding, would be a
mechanism to stretch State of Alaska dollars, and would be an
incentive for communities to maintain infrastructure for its
entire economic life.
MS. LISTER moved on to slide 26, "Recommendation B-4," and spoke
about on-bill financing, which she described as similar to the
commercial PACE program, except that repayment was through the
utility bill. She reported that both mechanisms allowed for
less risk to the lender, and more attractive terms to the
borrower, while saving energy and money, and creating business
opportunity for local economies in both the financing industry
and the construction trade.
MS. LISTER addressed slide 27, "Recommendation B-5," which
recommended to stabilize the funding for loans from the
residential weatherization assistance programs, as this had the
best return of government energy programs for investment in
energy savings. She recommended to maintain a baseline funding
of $10 million per year, which would enable the continuation of
this program and would capitalize on the existing trained work
force. She suggested to modify the rules of the home energy
rebate program to create a sliding scale of income based match,
so as to better serve Rural Alaska and home owners without the
cash on hand to participate. She moved on to the six
recommendations under the next pillar, "Accountability and
Sustainability," slide 28. These requirements and incentives
would maximize the operational life of infrastructure and would
provide for financial and management standards that would
increase the ability to access that financing. She directed
attention to slide 29, "Recommendation C-1," which would
strengthen business and financial management assistance for PCE
eligible utilities. Reducing the non-fuel costs of power
through efficient business operations could save millions of
dollars each year. She shared that in PCE communities, the non-
fuel costs were almost half of the total electric costs, and
more efficient business and management practices could bring
direct savings to the consumers and the state with reduced PCE
payments. She recommended to codify the commitment.
11:33:12 AM
MS. LISTER declared that "Recommendation C-2," slide 30, would
build off successful regional activity, recognizing that the
state cannot and should not do everything, as regional entities
often better knew the community needs and could more quickly
respond. She offered some examples of assistance to include
management of utility finances and accounting, expansion of
regional utility cooperatives, fuel purchasing cooperatives, and
management of building efficiency programs. Presenting slide
31, "Recommendation C-3," she reported that a cost effective
regulatory system would ensure PCE eligible electric utilities
were fit, willing, and able to provide the required services,
and would ensure that assets were maintained for their economic
life and that the financial and managerial leadership of the
utilities would minimize non fuel costs.
11:35:07 AM
MS. LISTER turned to slide 32, "Recommendation C-4:" and
explained that AEA recommended that all community buildings
receiving PCE, and larger than 5000 square feet, be required to
have an energy audit and implement the recommendations of those
audits, should they provide net savings within 10 years. She
stated that having efficient community facilities allowed
communities to spread the community facility subsidy allocation
over a larger number of buildings, as well as lowering the
community facility operating costs. It also ensured that PCE
was not subsidizing more kilowatt hours than necessary. She
directed attention to slide 33, "Recommendation C-5:" and
explained that the RCA (Regulatory Commission of Alaska)
currently made determinations on the eligibility of new energy
infrastructure developments after they were built. She stated
that research had found that this was a barrier to private
investment as it was a source of uncertainty. She relayed that
citing authority could reduce this uncertainty and also add a
layer of consumer protection. She reported on slide 34,
"Recommendation C-6:" and explained that this was designed to
provide a requirement for utilities to do continuous quality
improvement, seeking out and implementing cost effective
opportunities to reduce fuel consumption. She declared that
having a fuel reduction target allowed for a wider range of
project or program possibilities than an efficiency or renewable
target. She added that the recommendation supported the 2010
state energy policy goals for 50 percent renewable and 15
percent improvement in energy efficiency, as well as supporting
statute pertaining to cost minimization which required PCE
eligible utilities to "cooperate with appropriate state agencies
to implement cost effective energy conservation measures and to
plan for and implement feasible alternatives to diesel
generation." She emphasized that the cost effective aspect was
very important and that programs should not be advanced which
increased the cost to consumers. She directed attention to
slide 35, "Funding programs:" and explained that the statute
which created the "Affordable Energy Strategy" had two distinct
requirements for program funding recommendations: to suggest
potential revenue sources for funding state energy programs and
projects recommended by the study, and to recommend the means
for directly underwriting the energy costs. She offered slide
36, "Recommendation D-1:" and stated that the first funding
option was to use the Alaska Affordable Energy Fund, as the
statute also included creation of a fund which would take 20
percent of revenue from royalties off a future gas line to pay
for energy projects and programs in the study area, a fund which
was estimated to generate $80 - $150 million annually. She
pointed out that, as this revenue source was still more than a
decade away and there was a need for continued investment in
energy infrastructure, it was necessary to identify alternative
revenue sources for different projects and programs. She
declared that one potential revenue source for a small
subsection of energy programs and services was the PCE fund, and
while acknowledging the importance for maintaining this
endowment in perpetuity, she suggested a small increase in the
allocation from earnings to administer the PCE program and
directly related critical support services, slide 38,
"Recommendation D-2:". She shared that the full administrative
cost of the PCE program had been subsidized with general fund
dollars, and recommended instead to use existing statutory
authority to fully cover the PCE administrative costs.
11:39:57 AM
MS. LISTER moved on to slide 39, "Recommendation D-3:" and spoke
about a per unit energy surcharge, also referred to as a systems
benefit charge or universal service charge. These charges would
help create revenue streams to fund cost effective programs and
projects, specifically electric and heating projects in the
study area. She shared slide 40, "Recommendation D-4:" and
stated that AEA recommended to continue the Power Cost
Equalization (PCE) program and to revive the Alaska Heating
Assistance program in order to directly underwrite the cost of
energy in communities without cost effective infrastructure.
She reported that the PCE program was the largest and most broad
based consistent source of energy funding in the study area.
She emphasized that opportunities presented in the Affordable
Energy Strategy were expected to reduce the cost of energy,
although not enough to eliminate a need for the PCE program, and
that it was extremely important to maintain the integrity of the
PCE endowment fund to ensure the sustainability of the PCE
benefit.
11:41:41 AM
MS. LISTER shared one additional idea for consideration, slide
41, "For Consideration:". She suggested consideration for a
state entity with the authority to consolidate and manage
consumer energy to the extent which was reasonable, which would
increase efficiency for delivering state energy programs to
communities. She acknowledged that although this was not a new
idea, it was an idea which merited renewed consideration, as
consumer energy was such an important issue in Alaska and it was
imperative to address and coordinate these challenges at a high
level to be both efficient and effective. She pointed out that
implementation of the aforementioned recommendations could
spread state energy programs over half a dozen agencies, and
could be further complicated by institutional gaps and competing
agency mandates. She opined that development of a coordinated
and strategic plan to best assist communities could become
problematic without consolidated authority.
11:42:49 AM
MS. LISTER closed the PowerPoint with slide 42, "Conclusions,"
stating that keeping the lights on and buildings heated required
investments in energy infrastructure and insuring that those
investments were protected over the long term. She declared
that the state could take action to encourage stronger and more
affordable community energy systems, regardless of the budgetary
challenges, through policy, regulatory, and statutory changes.
She emphasized that the Affordable Energy Strategy provided
guidance for these changes.
11:43:19 AM
REPRESENTATIVE JOHNSTON asked if Recommendation A-3 suggested a
statewide building code beyond what was already written.
MS. LISTER replied that all the recommendations only applied to
the study area, and were not statewide.
REPRESENTATIVE JOHNSTON asked if this recommendation would merge
with those regulations already in place for Alaska and federal
housing programs.
MS. CONWAY clarified that the recommendation was for building
energy codes, which had been ratified by both AHFC and the
government housing summit.
REPRESENTATIVE JOHNSTON replied that financing required certain
building standards, which were often different in different
service areas. She asked if AEA had considered this.
MS. LISTER replied that AHFC had the building energy efficiency
standard. She added that housing funds through the Native
American Housing and Self Determination Act to regional housing
authorities also had specific code and energy requirements.
REPRESENTATIVE JOHNSTON expressed her understanding that
codified codes could become antiquated very quickly as science
and technology changed, suggesting caution as this approach
could be detrimental instead of helpful. She expressed
confusion for the one-stop shop financing and asked if it was a
source of information and coordination, or a source for all
funds.
MS. LISTER replied that conceptually it was all of those things,
although there was a lot to be clarified before it was
established. She explained that it was addressing a barrier to
small communities that lacked the administrative capacity to
"jump through the sometimes really substantial hurdles related
to federal funding opportunities for both grants and loans" and
how to access appropriate financing. She expressed anticipation
for acceptance of certain funding to be made available with less
paperwork for the borrower.
REPRESENTATIVE JOHNSTON asked if this could be negotiated among
the other state entities.
MS. LISTER opined that this was a matter of connecting and
coordinating, a lot of which already existed between AEA and
AHFC.
MS. CONWAY, in response to Representative Johnston explained
that there was a presentation to the Alaska Municipal League
(AML) in a few weeks.
11:52:02 AM
NEIL MCMAHON, Planning Manager, Alaska Energy Authority (AEA),
Department of Commerce, Community & Economic Development, in
response, said that he had not reached out specifically to AML.
REPRESENTATIVE JOHNSTON suggested AML as a resource.
CHAIR WOOL asked whether the state funding for weatherization
was a grant or a loan.
MS. LISTER replied that it was grant money.
CHAIR WOOL asked about the money for administration of the PCE
fund.
MS. CONWAY explained that there was some funding to AEA for part
of the administrative cost, but the recommendation was to fully
cover those costs, about $600,000 annually.
CHAIR WOOL asked if the universal service charge would be
applied to non-Railbelt utilities for use in non-Railbelt areas.
MS. LISTER replied that all the recommendations from the study
were for non-Railbelt utilities. She explained that there were
various ways to implement universal service charges, although
charges collected within a service area usually stayed in that
service area.
CHAIR WOOL shared his belief that most utilities in the non-
Railbelt were already expensive, and that any additional charge
would be tough for the community. He asked if the universal
service charges would stay in those specific communities.
MS. LISTER replied that this was still to be determined in the
deliberative process.
CHAIR WOOL asked how the aforementioned state entity would be
different than AEA.
MS. LISTER replied that the recommendation was to create a
single state entity with authority for consumer energy programs,
with no specific recommendation that AEA be that entity. She
explained that the AEA programs covered a wide range of energy
programs, while AHFC focused more on housing and the demand side
of the energy equation. She pointed out that the Department of
Transportation & Public Facilities provided many energy
retrofits on public facilities. She reiterated that the
recommendation was for one authority to create a strategic plan
and be more effective and efficient in the implementation.
11:58:19 AM
REPRESENTATIVE SPOHNHOLZ noted that there were quite a few
recommendations in the Affordable Energy Strategy which were
expected to produce cost savings. She asked if there was
modeling for any of these to better offer an understanding.
MS. LISTER acknowledged that there were models which would be
provided. She reported that the Affordable Energy model was an
interactive tool, which had documentation for what was driving
the model.
12:00:22 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Energy meeting was adjourned at 12:00 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| AEA Presentation for HENE - 2.7.17.pdf |
HENE 2/7/2017 10:15:00 AM |
|
| A.2.pdf |
HENE 2/7/2017 10:15:00 AM |
HB 81 |
| A.4.pdf |
HENE 2/7/2017 10:15:00 AM |
HB 81 |