HB 148-ENERGY EFFICIENCY PLAN AND GRANT FUND 4:12:15 PM CO-CHAIR EDGMON announced that the final order of business would be HOUSE BILL NO. 148, "An Act relating to a state energy use reduction plan and energy efficiency improvement contracts and to energy audits of public buildings conducted by the Department of Transportation and Public Facilities; relating to agency capital budget requests; establishing an energy efficiency grant fund in the Alaska Housing Finance Corporation; and providing for an effective date." 4:12:39 PM REPRESENTATIVE LES GARA, Alaska State Legislature, prime sponsor, introduced HB 148. He explained that he has worked with Representative Thomas to put together an energy efficiency bill. He pointed out that most states have a statewide energy plan, but Alaska does not. He pointed out an energy plan is not just a piece of paper. He recalled that alternative energy includes solar, wind, and nuclear power, which are alternatives to fossil fuels. However, the best way to reduce emissions is to reduce overall energy usage. He stated that energy efficiency is considered the fifth fuel, is termed "negawatts," and saves money. He pointed out that a pilot project in Anchorage estimates it will save $1 million per year through energy use by changing its lighting. He pointed out changing lighting is the fastest way to reduce energy costs. REPRESENTATIVE GARA explained that HB 148 has two main components. One is to create a grant fund, similar to the Renewable Energy Fund, to fund construction and renovation projects for non-state entities, such as municipalities. The grant fund would be targeted to those projects that will provide the greatest benefit per dollar spent. He also recognized the legislature would need to decide the appropriate funding level for the grant fund. Additionally, another component requires the state to prepare and adopt an energy plan. The bill requires departments to focus on projects that will pay for themselves within 15 years, and requires the Department of Transportation & Public Facilities (DOT/PF) to manage public facilities using standards. He pointed out that one applicable standard is the International Energy Conservation Code (IECC). He offered that the bill encourages the use of performance contracting, which is a way for state agencies to realize cost savings without having to pay for them in advance. He explained performance contracting such that the state would hire a private contractor, who is then paid from a portion of the energy savings. He provided an example, such as has been done in a pilot program at the Dimond Courthouse, as well as three other locations in the state. REPRESENTATIVE GARA opined that committee members are aware of the need for a plan, and that other side benefits exist. He highlighted that the construction industry is moving toward using the IECC; AHFC has adopted the IECC code for residential properties, although he admitted this bill does not apply to residential properties. He offered other support for the IECC, such as the Alaska Homebuilders Association's support, that the Alaska Housing Finance Corporation (AHFC) is also using the IECC on construction it finances. He reiterated the components: the grant fund and the energy plan to require energy efficiency construction and retrofits. He opined that in the long run the bill's fiscal note is a negative. However, these changes will not happen without requirements in statute. He suggested the legislature's focus is on the current cost, while this bill is geared to look at the state's cost in 10 or 15 years. He remarked that he worked closely with DOT&PF on the bill, but that he is unsure who will administer the grant fund since the state does not currently have an energy agency. He noted that the Alaska Energy Authority (AEA) has held a limited role but it has been expanding its role, and that AHFC has performed energy efficiencies in residences, but does not perform energy efficiencies in commercial buildings. He offered that several knowledgeable agencies have experts, such as the DOT/PF, but at this time the key agency has not identified. He offered his view that HB 148 would force the state to plan and it would save money. 4:20:34 PM REPRESENTATIVE TUCK asked how the pilot program is functioning for the Dimond Courthouse. REPRESENTATIVE GARA deferred to DOT/PF to address the Dimond Courthouse. However, he explained that part of the proposed energy plan will ask the state to use performance contracting if cost-effective. 4:21:23 PM REPRESENTATIVE RAMRAS inquired as to whether Representative Gara is also working with co-chairs of the House Special Committee on Energy. REPRESENTATIVE GARA answered that he has been working with Representative Thomas and with Senator Wielechowski's office. 4:21:55 PM REPRESENTATIVE JOHANSEN referred to page 3, lines 4-5, of the bill which would give a priority to projects that serve municipalities or unincorporated communities with a population of less than 15,000. He asked whether greater cost savings could be had in larger communities. REPRESENTATIVE GARA offered that the grants would be awarded by considering three factors: the highest level of energy savings, priority to small communities since the cost of energy is generally much higher than in large communities, and encourage communities to seek funding from other sources. He elaborated that larger communities also have larger tax bases than smaller communities. 4:24:03 PM REPRESENTATIVE JOHANSEN referred to page 2, lines 27-28, and to page 4, line 18, of the bill which lists standards. He asked for clarification on the various standards in HB 148. REPRESENTATIVE GARA referred to the first option on page 2, for new construction projects to qualify lists an option to the IECC or to the Leadership in Energy and Environmental Design (LEED) standards. He explained that both building standards are listed because some agencies, such as the university, or municipalities currently use one or the other standard. He opined that both standards are highly regarded energy efficiency standards and if a local government has already adopted one, that the bill would recognize that standard can be used. However, the IECC is only mentioned in proposed section 44.42.067 which is the energy plan portion of the bill. Thus, if the state will undergo a large construction project, it must pick one or the other. He opined that the IECC is the more widely accepted. 4:25:59 PM JOEL ST. AUBIN, Engineer, Chief, Statewide Facilities, Department of Transportation & Public Facilities (DOT/PF, stated he was available for questions. 4:26:27 PM REPRESENTATIVE RAMRAS asked how much more it would cost to construct a building using LEED standards and if this bill requires the LEED standard be used to retrofit a building. MR. ST. AUBIN answered that he would need to look at a specific project to determine the cost estimate. However, to meet the LEED certification on a current project in Bethel, Alaska will cost the DOT&PF an additional $250,000. He stated that the cost is less than a 1 percent increase. 4:27:17 PM CO-CHAIR EDGMON asked for the size of the building in the specified project. MR. ST. AUBIN responded that it the project is roughly a 20,000 square foot building, with a budget of $16 million. REPRESENTATIVE GARA reiterated that the bill does not apply to private buildings. He added that unless a municipality has preferred the LEED over the IECC standard that it can choose to follow LEED. He added that it would be a local decision and that retrofitting is not covered under HB 148, except for state buildings that estimate cost savings over 15 years garner savings more than the cost of the retrofit. 4:28:19 PM REPRESENTATIVE PETERSEN asked for the average pay back time if standards are increased to LEED standards. REPRESENTATIVE GARA stated he was unsure of the average cost. He opined that often LEED considers insulation such as windows. However, he remarked that the lighting efficiency is generally about two years. Thus, the bill is important just in terms of lighting. 4:30:02 PM REPRESENTATIVE GARA, in response to Co-Chair Edgmon, suggested that during an expanded hearing that it would be useful to bring in cold climate experts for future testimony. He offered his belief that they do support IECC standards. However, he agreed some minor elements of the codes do not make sense, such as the preference for white, which is more energy efficient in warmer climates, but it does not make sense. He remarked that the bill addresses aspects of the code that do not make sense. 4:30:58 PM REPRESENTATIVE GARA concluded that the bill represents a lot of work, but is comprehensive. He encouraged committee to at least consider working on the lighting aspect. 4:32:28 PM CO-CHAIR EDGMON requested further information and any back-up. REPRESENTATIVE TUCK related that he serves on the Anchorage School District School Board, which had six schools in its pilot program. He offered the results were amazing savings. He commented that if the state can make it easier for schools that it could free up some money for other educational purposes. CO-CHAIR EDGMON announced that HB 148 would be held over for further consideration.