HB 323-NONATTAIN AREA HOME HEATING SYSTEM GRANTS  3:47:43 PM CO-CHAIR FOSTER announced the final order of business would be HOUSE BILL NO. 323, "An Act relating to the Alaska energy efficient home grant fund; and creating a grant program for converting homes in regions designated as particulate matter nonattainment areas to efficient home heating systems." 3:47:45 PM REPRESENTATIVE SADDLER moved to adopt HB 323, Version 27- LS1275\M, as the working document. There being no objection, Version M was adopted. 3:48:35 PM REPRESENTATIVE SADDLER moved to adopt the fiscal note identified as HB323-DOR-AHFC-03-01-12. There being no objection, the fiscal note was adopted. 3:48:46 PM BRANDON BREFCZYNSKI, staff to Representative Tammie Wilson, Alaska State Legislature, speaking on behalf of Representative T. Wilson, prime sponsor, introduced HB 323. Mr. Brefczynski said the bill would provide assistance for designated U.S. Environmental Protection Agency (EPA) Particulate Matter (PM- 2.5) Nonattainment Areas, in order to resolve air quality problems. Inefficient furnaces and non-EPA certified wood stoves are two of the primary contributors to poor air quality at the level of PM-2.5. The bill would establish a program administered by the Alaska Housing Finance Corporation (AHFC), Department of Revenue (DOR), providing up to a $10,000 grant for homeowners residing in a nonattainment area to convert inefficient, oil-fired furnaces or non-EPA certified wood stoves, to new, cleaner oil-fired furnaces or EPA certified wood stoves. Unlike AHFC's energy efficiency rebate program, or the Fairbanks North Star Borough's (FNSB) wood stove change-out program, which require the homeowner to pay the up-front expenses of energy efficiency upgrades, HB 323 would provide a grant for the purchase and installation of a more efficient heating device. Also, HB 323 is free from the income limitations that are part of the AHFC weatherization program. This legislation is needed as FNSB is located in an EPA nonattainment area because of its poor air quality, primarily due to wood stoves and oil-fired furnaces, which contaminate the air with sulfur dioxide. The borough was designated a nonattainment area in 2010, and has until 2014 to attain cleaner air by developing a state implementation plan that establishes limits or standards to minimize emissions, and also establishes control strategies; HB 323 would be one of the control strategies. However, if FNSB does not meet attainment and develop a state implementation plan, EPA could sanction the state by withholding federal highway dollars, except for certain safety projects. Mr. Brefczynski explained that to qualify for the program, a homeowner must operate a furnace that is less than 80 percent efficient, or a non-EPA certified wood stove. To verify that these qualifications are met, an energy rater will visit the home and issue a report to AHFC. Subsequently, a grant would be issued to a vendor, who would receive payment after the installation of the heating device, and the homeowner would receive an Internal Revenue Service (IRS) Tax Form 1099 for reporting the income from the grant. 3:52:43 PM MR. BREFCZYNSKI provided information on the savings gained from replacing an inefficient device; for example, improving from a 60 percent-efficient furnace to an 85 percent-efficient furnace will save $30 out of every $100 spent on fuel. Furthermore, replacing a non-EPA certified wood stove with an EPA certified wood stove will "greatly improve our air quality." The following restrictions are placed on the program: a homeowner who has already participated in the AHFC energy rebate program or weatherization program will not be eligible for a grant; a homeowner who qualifies for the income-based weatherization program must utilize that program; and a homeowner who receives a grant through the HB 323 program is not eligible to receive a future grant from the AHFC energy rebate program or weatherization program. He concluded that HB 323 would provide nonattainment areas with another tool to combat local air quality issues - by the removal of non-efficient furnaces and non-EPA certified wood stoves - in order to avoid EPA sanctions and to improve the health of those living in nonattainment areas. 3:54:44 PM REPRESENTATIVE SADDLER asked which program is the most attractive option to a homeowner in the Interior, the low-income weatherization program, the energy rebate program, or the program proposed by HB 323. 3:55:27 PM MR. BREFCZYNSKI said the weatherization program is best for those who qualify. For those with capital on hand, the rebate program may be preferable as rebates can be used to pay for more than a furnace upgrade. He said the intent of HB 323 is to help those who do not qualify for the weatherization program, yet do not have the funds necessary to utilize the rebate program, or FNSB's wood stove change-out program. 3:56:27 PM REPRESENTATIVE SADDLER asked what efforts Fairbanks has made to comply with EPA's particulate matter standards. MR. BREFCZYNSKI said FNSB offers a wood stove change-out program that provides funds for three options: the removal of a non-EPA certified wood stove or an outdoor hydronic boiler; the replacement of a non-EPA certified wood stove with an EPA certified wood stove; and the repair of a non-EPA certified wood stove. In addition, FNSB has begun a public service campaign to inform residents how to burn wood efficiently. In further response to Representative Saddler, he said vehicular traffic is not an air pollution problem as FNSB no longer has a carbon dioxide (C02) nonattainment status. CO-CHAIR PRUITT asked for the extent of the home energy audit required by the bill. MR. BREFCZYNSKI explained that the energy rater would come to the home and determine the efficiency level, or the EPA certification, of the furnace, take pictures, and send verification to the grant administer. CO-CHAIR PRUITT suggested there could be a minimum standard of efficiency for heating devices, instead of an energy audit. The program could have regulations set for a percentage of an efficiency level that would qualify. MR. BREFCZYNSKI added that the energy rater will also assess how much the retrofit will cost, thus the rater will confirm whether the device qualifies, and will provide an estimate to AHFC of the cost, up to $10,000. 4:00:02 PM CO-CHAIR PRUITT than asked whether there is a potential for personal liability to the energy rater if his or her estimate is low, and the actual cost is over the maximum grant amount of $10,000. MR. BREFCZYNSKI said he would provide this information to the committee. REPRESENTATIVE PETERSEN gave an example of a homeowner who had a previous energy audit, but did not complete the rebate program due to a lack of money. In this case, could the homeowner use the previous audit, or is it necessary for the rater to repeat the audit. MR. BREFCZYNSKI said the rater would need to revisit the home. REPRESENTATIVE PETERSEN called attention to page 2, lines 12-13, of the bill that read: 25 percent of the gross floor area of the building for which a grant is received may be devoted to commercial use. ... REPRESENTATIVE PETERSEN surmised a person using a home as a business could qualify. MR. BREFCZYNSKI said yes, and pointed out that these are the same standards used by AHFC's energy rebate program. REPRESENTATIVE SADDLER asked whether other states are offering similar grant programs. 4:03:53 PM MR. BREFCZYNSKI said he would provide this information to the committee. CO-CHAIR FOSTER held over HB 323.