03/13/2009 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB121 | |
| SB31 | |
| SB58 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 58 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 121 | ||
| = | SB 31 | ||
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
March 13, 2009
3:35 p.m.
MEMBERS PRESENT
Senator Lesil McGuire, Co-Chair
Senator Bill Wielechowski, Co-Chair
Senator Bert Stedman
Senator Gary Stevens
Senator Thomas Wagoner
MEMBERS ABSENT
Senator Charlie Huggins, Vice Chair
Senator Hollis French
COMMITTEE CALENDAR
SENATE BILL NO. 121
"An Act relating to energy efficiency for public facilities with
the intent of reducing state operating costs."
MOVED CSSB 121(RES) OUT OF COMMITTEE
SENATE BILL NO. 31
"An Act relating to a geothermal electricity production tax
credit under the Alaska Net Income Tax Act."
MOVED CSSB 31(RES) OUT OF COMMITTEE
SENATE BILL NO. 58
"An Act establishing February 2 of each year as Marmot Day; and
providing for an effective date."
MOVED SB 58 OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: SB 121
SHORT TITLE: ENERGY EFFICIENCY BLDGS/PUBLIC WORKS
SPONSOR(s): RESOURCES
02/20/09 (S) READ THE FIRST TIME - REFERRALS
02/20/09 (S) RES, FIN
03/09/09 (S) RES AT 3:30 PM BUTROVICH 205
03/09/09 (S) Heard & Held
03/09/09 (S) MINUTE(RES)
BILL: SB 31
SHORT TITLE: GEOTHERMAL ELEC. PROD. TAX CREDIT
SPONSOR(s): SENATOR(s) MCGUIRE
01/21/09 (S) PREFILE RELEASED 1/9/09
01/21/09 (S) READ THE FIRST TIME - REFERRALS
01/21/09 (S) ENE, RES, FIN
02/12/09 (S) ENE AT 11:00 AM BUTROVICH 205
02/12/09 (S) Heard & Held
02/12/09 (S) MINUTE(ENE)
02/27/09 (S) ENE AT 11:00 AM BELTZ 211
02/27/09 (S) Moved CSSB 31(ENE) Out of Committee
02/27/09 (S) MINUTE(ENE)
03/02/09 (S) ENE RPT CS 1DP 2AM NEW TITLE
03/02/09 (S) DP: MCGUIRE
03/02/09 (S) AM: WIELECHOWSKI, STEDMAN
03/09/09 (S) RES AT 3:30 PM BUTROVICH 205
03/09/09 (S) Heard & Held
03/09/09 (S) MINUTE(RES)
BILL: SB 58
SHORT TITLE: MARMOT DAY
SPONSOR(s): SENATOR(s) MENARD
01/21/09 (S) PREFILE RELEASED 1/16/09
01/21/09 (S) READ THE FIRST TIME - REFERRALS
01/21/09 (S) STA, RES
03/03/09 (S) STA RPT 4DP
03/03/09 (S) DP: MEYER, FRENCH, KOOKESH, PASKVAN
03/03/09 (S) STA AT 9:00 AM BELTZ 211
03/03/09 (S) Moved SB 58 Out of Committee
03/03/09 (S) MINUTE(STA)
03/13/09 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
SHELLY MORGAN
Staff to Senator Wielechowski
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Commented on SB 121 for the sponsor.
MERRA KOHLER, President/CEO
Alaska Village Electric Cooperative (AVEC)
POSITION STATEMENT: Supported SB 31.
TREVOR FULTON
Staff to Senator McGuire
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Commented on SB 31 for the sponsor.
CHRIS ROSE
No stated affiliation
POSITION STATEMENT: Supported an immediate effective date and
suggested middle ground between 5 and 10 cents on SB 31.
DAN STICKEL, Petroleum Economist
Department of Revenue
POSITION STATEMENT: Available to answer fiscal note questions on
SB 31.
TOM LAKOSH
No stated affiliation
POSITION STATEMENT: Supported SB 31, but suggested a number of
changes.
DOMINIC LEE, CEO
Little Susitna Engineering and Construction Company
POSITION STATEMENT: Supported SB 31, but had suggestions for
changes.
DEBBIE PRAYTOR
Staff to Senator Menard
Alaska State Legislature
Juneau, AK
POSITION STATEMENT: Commented on SB 58 for the sponsor.
MARILYN LANE
Staff to Senator Menard
State Capital Bldg.
Juneau, AK
POSITION STATEMENT: Available for comments on SB 58.
ACTION NARRATIVE
3:35:23 PM
CO-CHAIR BILL WIELECHOWSKI called the Senate Resources Standing
Committee meeting to order at 3:53 p.m. Present at the call to
order were Senators Stevens, Stedman, McGuire, and Wielechowski.
SB 121-ENERGY EFFICIENCY BLDGS/PUBLIC WORKS
CO-CHAIR WIELECHOWSKI announced SB 121 to be up for
consideration.
3:36:01 PM
CO-CHAIR MCGUIRE moved to adopt work draft CSSB 121(RES),
labeled 26-LS0586\W. There was no objection and version W was
before the committee.
3:36:36 PM
SHELLY MORGAN, staff to Senator Wielechowski, explained that SB
121 will reduce the cost of operating state facilities by
reducing the amount of energy consumed by them over the next 15
years. It enables the state to lead by example in the arena of
energy efficiency and better position Alaska to receive federal
stimulus funding for the state Energy Program grants. By
prioritizing energy retro-fit projects and using performance
contracts, the state can begin saving energy right away.
She pointed out that performance contracts require no upfront
payments from the state. Performance contractors perform energy
audits for facilities and make whatever construction changes are
needed for the energy retro-fit. They are paid solely through
the energy savings the state accrues over time.
3:37:31 PM
SENATOR WAGONER joined the committee.
3:38:02 PM
MS. MORGAN said that these guaranteed savings are paid to the
energy service company for the retro-fit and within 15 years or
less cost savings from efficiency upgrades go directly to the
state - saving public funds.
She said the Department of Transportation and Public Facilities'
(DOTPF) first performance contract of only eight buildings
resulted in a savings of $365,991 based on 2006/07 rates, which
would be $557,096 based on 2008 rates. Within the first year the
savings from just these eight buildings could essentially cover
the annual staffing and travel requirements found in the DOTPF
fiscal note. If the state executed just 25 similar contracts, it
could save over $13 million based on 2008 rates in the first
year.
Two fiscal notes from DOTPF are for doing the work with
performance contracting - $363.600; the other shows the cost to
the state without performance contracting - over $17 million.
She said it is their intent that the committee adopt the fiscal
note based on doing performance contracting.
3:39:17 PM
MS. MORGAN went on to explain the six changes made to version P
dated 3/9/09 that are now found in version W. All the changes
were based on feedback from experts and committee members at the
March 9 hearing; all changes have been approved by the DOTPF and
the Alaska Energy Authority.
The first change is that the database be updated annually rather
than every 10 years. This can be done simply by having
individual building managers update data based on their utility
bills. Basically the individual responsible for paying the
utility bill for a facility could easily enter the utility data
into a spread sheet and once each year that data could be rolled
up into the rather than paying a DOTPF staff person to spend
hours compiling data on every facility.
The second change is that all facilities, not just heated
facilities, will be retrofitted and eligible for performance
contract retro-fit projects.
Third, the performance contracts may also include renewable
energy projects. "Alternative energy" was replaced with
"renewable energy" to better fit with the intent of this bill.
When determining the best energy efficiency measures for each
facility, the performance contractor may determine that it is
appropriate for a facility to generate its own energy using
renewable sources.
The fourth change is that the reference to the International
Energy Conservation Code (IECC) was removed. The bill now states
that facilities will be made to meet or exceed the most recently
published edition of the Illuminating Engineering Society of
North America (IESNA) standard 90.1 of the American Society of
Heating, Refrigerating and Air Conditioning Engineers (ASHRAE).
She explained that ASHRAE is more typically used for commercial
facilities and does a much better job of addressing Alaska's
climate conditions while still meeting the same basic guidelines
found in the IECC. The IECC identifies only three climate zones
which are insufficient for the entire state of Alaska.
MS. MORGAN said that fifth, the decision to postpone a retrofit
due to lack of cost-effectiveness was modified to add a
provision that this decision may be based in part on wither or
not the department would be able to meet a return on investment
within 15 years after project completion.
The sixth change is that the energy use index language found in
Sec. 44.83.955, was adjusted to better define the energy use
index and the database. The Alaska Energy Authority shall
establish an energy index to measure energy consumption, and the
database they prepare will be made up of energy use index data
for each facility.
She explained that these changes do not alter content, but just
provides clarity through definition.
3:43:38 PM
SENATOR STEDMAN remarked that the Railbelt Energy Fund language
allows buildings and facilities for energy conservation that are
state owned to be retrofitted, and asked how often the state has
used it and how that ties into the bill.
MS. MORGAN answered that starting in 2004 the DOTPF has done two
performance contracts totaling 16 buildings. Now there is no way
of prioritizing the retrofit. This bill not only allows for and
encourages the performance contracting, but establishes an
energy use database so that they can identify which buildings
are consuming the most energy so that the retrofit projects can
start with the most energy consuming first.
SENATOR STEDMAN added that the Railbelt Energy Fund allows
access to those funds for retrofitting state owned buildings and
facilities for energy conservation and it appears that the
Railbelt has most of the major state buildings. He was wondering
if that fund was every used for that purpose and how that policy
affected this bill.
CO-CHAIR WIELECHOWSKI said the capital in Juneau and any public
facilities outside of the Railbelt would not be included in the
Railbelt Energy Fund. This bill creates an energy use index,
which allows the state to prioritize what will be retrofitted
first.
He thought it better public policy and cheaper for the state to
undertake performance based contracting, because it doesn't cost
anything. The money you would save in paying for utilities would
pay for the upgrades.
3:47:11 PM
CO-CHAIR MCGUIRE moved to pass CSSB 121(RES), version W, from
committee with individual recommendations and attached fiscal
note(s). There was no objection and it was so ordered.
SB 31-GEOTHERMAL ELEC. PROD. TAX CREDIT
3:48:02 PM
CO-CHAIR WIELECHOWSKI announced SB 31 to be up for
consideration.
CO-CHAIR MCGUIRE, sponsor of SB 31, moved to adopt CS for SB 31,
labeled 26-LS0217\D, as the working document. There was no
objection and version D was before the committee.
CO-CHAIR MCGUIRE explained that version D is a result of
testimony from the last meeting. The amount of the production
tax credit to a graduation system that ties the tax credit to
the retail cost of power for a community in Sec. 2(a) was
changed to equal 15 percent of the retail electricity rate for a
given community. The tax credit is a minimum of 2.1 and a
maximum of 5 cents per kWh. She explained that the change ties
the amount of the production tax credit to the cost of power
rather than the power plant capacities or community populations.
It has the advantages of a tiered system without the arbitrary
thresholds. The original bill had a flat rate of 2.1 cents per
kWh irrespective of the utility rate in any given community and
population.
Sec. 2(a)(2) was removed; it allowed power producers to claim
the tax credit if they used the electricity they produced for
their own commercial purposes.
CO-CHAIR MCGUIRE said the intent of the bill is to encourage the
production and distribution of electricity to communities that
need it the most. This ensures that the power being incentivized
by the tax credit makes it onto the grid and into the homes of
Alaskans and it addresses the industry concern of power
producers claiming the tax credit by simply selling the
electricity to themselves in a cyclical fashion.
Sec. 2(b) changes the number of years the credit could be
claimed from 4 to 5 years. The concern was that 10 years would
add up to massive subsidies; 4 to 5 years was a middle ground.
They don't have a figure for the amount of the subsidy, because
they don't know what kind of energy production will be
incentivized.
Sec. 2(g) caps the aggregate amount of tax credit plus state
grants at 10 percent of the capital cost of a given project can
be claimed. This prevents over-subsidization of projects that
are eligible for both the production tax credit (PTC) and the
Renewable Energy Fund grants.
Sec. 2(k)(2) changes the definition of "energy producer" so that
independent power producers are not required to obtain a
Certificate of Public Convenience and Necessity from the RCA.
Senator Huggins' concern was that they would be limiting the
eligibility of projects to power plants with the production
capacity of 100 kWh or more.
3:52:54 PM
Sec. 2(k)(3) changes all occurrences of "alternative energy" to
"renewable energy". This is moving toward a more federal
definition of renewables and they want to be sure that the PTC
program reflects the change to renewable energy.
All sections moved the tax credit language from AS 43.98, which
is revenue, taxation and miscellaneous provisions to AS 43.20,
which is revenue and taxation, but under the Alaska Net Income
Tax. This was recommended by the Tax Division because it ensures
that the credit is applicable only against the corporate income
tax and not any other state taxes that might accrue.
3:54:53 PM
MERRA KOHLER, President/CEO, Alaska Village Electric Cooperative
(AVEC), said they are a non-profit electric utility that serves
53 villages. They are also proud to take the lead in the state
to develop renewable energy projects to serve their small
communities. They now have wind projects serving seven
communities. Two more are going on line this year and two or
three more again next year. She supported the intent of this
bill. She pointed out that their most difficult project in the
last couple of years has been a 300 kW project, which consists
of three 100 kW machines. They have achieved as high as a 25-30
percent penetration of renewable energy into their conventional
systems. A project that is 300 kW in size in a remote rural
village costs approximately $4 million - including the control
equipment that is needed to interface with the diesel system.
She said a 5 cent kWh production tax credit over a five-year
period would translate into a total credit of $197,000, a modest
percentage of the total cost of the project. So, she urged them
to keep a 10 cent kWh limit. Otherwise, a lot fewer large
projects would consume a much larger chunk of the production tax
credit.
3:57:53 PM
She also said an immediate effective date would be very
beneficial because of two AVEC projects that will go on line
this year including a small hydro project in Southeast Alaska.
3:58:39 PM
SENATOR STEVENS asked if the January 1 effective date would
delay the starting date for the projects.
MS. KOHLER replied that she didn't think so, but if delaying a
project for three would net another $200,000, they might be
inclined to put it off. They could absorb operating costs from
the system for another three or four years.
CO-CHAIR WIELECHOWSKI said he has concluded that "the 2 cents is
pretty generous; the 5 cents is extremely generous; the 10 cents
was a lot." He and Mr. Fulton tried to figure out what the
subsidy would be for 1 mgW hydro plant and they came up with a
half million dollars a year in tax credit.
TREVOR FULTON, staff to Senator McGuire, added that it depends
on the size of the project, but it could amount to several
millions of dollars.
4:01:51 PM
CHRIS ROSE supported Ms. Kohler's comments on SB 31. He
supported an immediate effective date and suggested middle
ground between 5 and 10 cents.
DAN STICKEL, Petroleum Economist, Department of Revenue, was
available to answer fiscal note questions.
4:03:49 PM
TOM LAKOSH thanked them for adopting the 15 percent that he
recommended. However, he said they made a miscalculation in how
it would be applied and that would cause them to reconsider the
5-cent and 5-year limit.
He explained that what happens when you have a 15 percent of the
retail rate subsidy is that as soon as the renewable energy
comes on line, it lowers the rate at which the utility is
charging for its per kilowatt. So, the rate falls precipitously
immediately. So the second year when the retail rate is
recalculated, the subsidy goes way down, because they are now
taking 15 percent of a much cheaper cost. So this isn't as large
a subsidy as they assume. He advised:
4:06:34 PM
In order to give enough incentive to move to the
renewable resource, you need to have this heavily
front loaded so that because as soon as they produce
cheap energy, their subsidy essentially goes away.
The same situation happens with the five-year recovery period.
Because the utility cost is recalculated every year, the subsidy
goes way down as soon as it comes on line. This is a real
problem, and he suggested upping the limit on capital costs to a
maximum total subsidy of 20 percent, because it's extremely
expensive to develop these projects in rural communities. If
they get the subsidy upfront, companies will be competing with
each other to fully replace the diesel so they can get the full
10 cents the first year.
4:10:04 PM
DOMINIC LEE, CEO, Little Susitna Engineering and Construction
Company, said two kinds of people want to use the tax credit.
The non profits want to sell the credit to somebody else, but
the private for profit companies would like to keep it to reduce
their tax. His private for profit project organization would
like the state to give them longer term, like 10 years, but at
half the rate - 2.5 cents.
4:11:50 PM
Another concern, he said, is their project has funding available
right now, but they will lose the $2.8 billion from their Asian
investor if they can't find money for the $10 million AEA
feasibility study.
CO-CHAIR WIELECHOWSKI closed public testimony.
4:13:01 PM
SENATOR STEVENS asked how many households 100 kW serves.
MR. ROSE replied roughly 100 households.
SENATOR STEVENS said he was concerned that the subsidy only
applies to projects placed into service on or after January 1,
2010. The Kodiak Electrical Association has been planning a wind
project for five years and this summer installed the concrete
foundations for three wind mills on Pillar Mountain and will
install the towers next year. This effective date would make
them miss the opportunity to receive a tax credit by three
months. The credit for Kodiak would amount to $1.2 million. He
said their goal is not to retard the use of wind power, and it
would make sense to change the effective date to July 1.
4:16:44 PM
SENATOR STEVENS moved to change the effective date to July 1,
2009 on page 2, lines 14 and 16. There were no objections and it
was so ordered.
4:18:19 PM
CO-CHAIR MCGUIRE moved to report CS for SB 31, version D as
amended, from committee with individual recommendations and
attached fiscal note(s). There being no objection, CSSB 31(RES)
moved from committee.
SB 58-MARMOT DAY
4:18:57 PM
CO-CHAIR WIELECHOWSKI announced SB 58 to be up for
consideration.
DEBBIE PRAYTOR, staff to Senator Menard, sponsor of SB 58,
introduced herself.
MARILYN LANE, staff to Senator Menard, also introduced herself.
MS. PRAYTOR said that SB 58 establishes February 2 of each year
as Marmot Day and creates a localized Alaska version of
Groundhog Day. Other states also have incarnations of "the
famous groundhog." It can be celebrated by special events at the
Alaska Zoo to school celebrations with an educational angle.
4:21:34 PM
CO-CHAIR MCGUIRE moved to report SB 58 from committee with
individual recommendations and attached fiscal note(s). There
was no objection and it was so ordered.
4:22:23 PM
There being no further business to come before the committee,
Co-chair Wielechowski adjourned the meeting at 4:22 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| CS for SB 121 (Version W).pdf |
SRES 3/13/2009 3:30:00 PM |
SB 121 |
| CS for SB 121 (W) compared with (P).doc |
SRES 3/13/2009 3:30:00 PM |
SB 121 |
| SB 31 Bill Packet.pdf |
SRES 3/9/2009 3:30:00 PM SRES 3/13/2009 3:30:00 PM |
SB 31 |
| SB 121 Bill Packet.pdf |
SRES 3/9/2009 3:30:00 PM SRES 3/13/2009 3:30:00 PM |
SB 121 |
| SB 31 - Blank CS (Version D).pdf |
SRES 3/13/2009 3:30:00 PM |
SB 31 |
| SB 31 - Explanation of Changes (Version D).doc |
SRES 3/13/2009 3:30:00 PM |
SB 31 |
| SB 58 - Bill Packet.pdf |
SRES 3/13/2009 3:30:00 PM |
SB 58 |