HB 411-POWER PROJECT FUND      4:44:20 PM CO-CHAIR MILLETT announced that the next order of business would be HOUSE BILL NO. 411, "An Act relating to the power project fund; authorizing the Alaska Energy Authority to charge and collect fees relating to the power project fund; authorizing the Alaska Energy Authority to sell and authorizing the Alaska Industrial Development and Export Authority to purchase loans of the power project fund; providing legislative approval for the sale and purchase of loans of the power project fund under the memorandum of understanding dated February 17, 2010; and providing for an effective date." 4:44:41 PM SARA FISHERGOAD, Deputy Director-Operations, Alaska Industrial Development & Export Authority (AIDEA) and Alaska Energy Authority (AEA), Department of Commerce, Community, & Economic Development (DCCED), informed the committee that HB 411 deals with two power project fund issues. The first issue is to authorize the sale of power project fund loans from AEA to AIDEA in order to provide approximately $20.6 million to the power project fund for new loans. She noted that AEA and AIDEA have executed a memorandum of understanding (MOU) that outlines the terms for the purchase and sale. To address the second issue, the bill allows AEA to adopt regulations to establish a fee structure for the power project fund. Her department recommends the collection of application and loan origination fees in a manner similar to other AEA loan programs. Ms. FisherGoad pointed out that the loans to be sold are current, and AEA will continue to assume the risk for future delinquent loans. 4:47:20 PM CO-CHAIR MILLETT asked for a sectional analysis. MS. FISHERGOAD advised that section 1 of the bill amends AS 42.45.010(a) to allow the proceeds of the sale to be deposited into the power project fund. Section 2 amends AS 42.45.010(d) to repeal and reenact AEA authority to adopt a fee structure. Section 3 adds new subsections that provide that the fees are deposited into the general fund, and provides AEA authority, with legislative approval, to sell and repurchase the loans. Section 4 amends AS 44.88.080 to allow AIDEA to purchase the loans from AEA as an investment of the revolving fund. Section 5 provides for legislative approval for AEA to sell, and AIDEA to purchase, the power project fund loans, and references the 2/17/10 MOU between AIDEA and AEA. Finally, section 6 provides for an immediate effective date. 4:49:50 PM CO-CHAIR MILLETT asked for the current balance of the power project fund. 4:49:55 PM MS. FISHERGOAD said that available funds are currently $5.4 million, with two pending loan applications. She said, "We are short of cash." 4:50:56 PM CO-CHAIR MILLETT assumed the sale of existing loans will add $20.6 million. MS. FISHERGOAD said that is an approximate amount. 4:51:20 PM CO-CHAIR MILLETT asked whether there are other loan applications pending. 4:51:36 PM MS. FISHERGOAD explained that there are no other loan applications pending; however, her department expects grantees for the renewable energy fund will be looking for opportunities for match requirements, and there is less money available from the Denali Commission. She anticipated more activity in the loan program for powerhouse upgrades, bulk fuel upgrades, energy efficiency upgrades, and the renewable energy fund. In further response to Co-Chair Millett, she said applicants for matching funds are required to complete a loan application process with due diligence. 4:53:11 PM CO-CHAIR EDGMON expressed his interest in learning more about the fund. 4:53:44 PM MS. FISHERGOAD called attention to the MOU between AEA and AIDEA that outlines the purpose of the fund. She noted the agreement section specifies the discount rate is 6.02 percent, and outlines the repurchase requirements for AEA in case a loan defaults. Ms. FisherGoad discussed one risk to AIDEA in that there may be a delay in the repurchase if AEA is short of funds. Finally, the last recital outlines some of the details that would need to be followed in case a loan is repurchased by AEA. 4:57:03 PM MS. FISHERGOAD, in response to Representative Tuck, pointed out that the last page of the MOU is Exhibit A, that outlines the loans that are to be sold. In further response to Representative Tuck, she explained that after a repurchase, AEA would be the agency collecting on the loan. Furthermore, the purpose of the repurchase agreement is to reduce the risk to AIDEA, thus the purchase price of the loans remains closer to the paramount of the loans outstanding. The intent was to not transfer the risk of a loan defaulting from AEA to AIDEA. 4:57:49 PM CO-CHAIR EDGMON referred to the amount of money set aside for the governor's scholarship program, and questioned why an equal amount of money is not set aside for energy projects around the state. 4:58:46 PM CO-CHAIR MILLETT observed there is support from the committee for the power project fund. 4:59:36 PM [Although not formally stated, HB 411 was held for public testimony.]