HB 154-AK HOUSING FINANCE CORP: SUSTAIN ENERGY  10:17:44 AM CHAIR RAUSCHER announced that the first order of business would be HB 154, "An Act relating to subsidiary corporations of the Alaska Housing Finance Corporation; and establishing the Alaska energy independence fund." 10:19:00 AM BRYAN BUTCHER, Chief Executive Officer and Executive Director, Alaska Housing Finance Corporation, Department of Revenue, on behalf of the prime sponsor, House Rules by request of the governor, co-presented a PowerPoint presentation, titled "House Bill 154: Alaska's Energy Independence Fund" [hard copy included in the committee packet]. Moving from slide 2 to slide 4, he gave a brief overview of the presentation and the presenters. He said that the presenters would discuss the role and policy objectives of the Alaska Housing Finance Corporation (AHFC) and the Alaska Energy Authority (AEA). He stated that both organizations seek to establish the Alaska Energy Independence Fund (AEIF) to help Alaskans become more energy resilient. 10:21:35 AM MR. BUTCHER continued to slide 5 and slide 6, stating that the AEIF would spur energy innovation and be consistent with the governor's energy objectives put forth when he created the Office of Energy Innovation and the Alaska Energy Security Task Force. He stated that AEIF would draw federal and private capital to invest in energy independence for Alaskan homes and businesses. Creating the AEIF would give Alaska an opportunity to apply for a grant with the U.S. Environmental Protection Agency's Greenhouse Gas Reduction Fund, which has a pool of $27 billion. This opportunity stacks with limited time energy tax credits. 10:25:22 AM MR. BUTCHER continued to slide 7 and slide 8, stating that the main policy objective of AEIF is to increase Alaskan energy independence and reduce energy costs for Alaskans. He advised that the creation of the fund would make Alaska competitive for a once in a generation opportunity for this federal funding. He stated that AHFC has a long history of managing programs, focusing on energy challenges facing homeowners and communities. 10:28:57 AM MR. BUTCHER moved from slide 9 to slide 12, stating that AHFC offers interest rate reductions when financing new or existing energy efficient homes, or when borrowers make energy improvements to an existing home. He advised that it offers loans which will improve the value of a home. He offered that AHFC has financed 338 renovation loans for just under $100 million since fiscal year 2020. He said that AHFC manages the federal and state weatherization programs in Alaska, which are meant to provide upgrades for homes to be more energy efficient by protecting them from certain weather conditions. It also manages the statistical database for energy audits. He reiterated that AHFC has a history of working with Alaskans to meet their energy needs, and it works with other agencies and organizations. 10:34:39 AM CURTIS THAYER, Executive Director, Alaska Energy Authority, Department of Commerce, Community, and Economic Development, on behalf of the prime sponsor, House Rules by request of the governor, co-presented a PowerPoint presentation titled "House Bill 154: Alaska's Energy Independence Fund." He began on slide 13 and slide 14, giving a brief overview of AEA's work in the state. He pointed out that AEA works to reduce the cost of energy in the state by addressing the resiliency, reliability, and redundancy of Alaska's energy portfolio. He stated that AEA owns different sources of energy around the state, using both renewable energy and fossil fuels. He stated that AEA manages the Power Cost Equalization fund. This fund subsidizes and reduces energy costs for rural Alaskans. He added that AEA provides loans and grants to local utilities, governments, and independent power producers (IPPs) to construct and upgrade energy and power generation facilities. He said that AEA continues to work with local and regional partners to develop and plan for cost effective energy infrastructure. He displayed a map showing the different projects and services managed by AEA. 10:39:06 AM AKIS GIALOPSOS, Deputy Executive Director, Alaska Housing Finance Corporation, Department of Revenue, on behalf of the prime sponsor, House Rules by request of the governor, concluded the PowerPoint presentation titled "House Bill 154: Alaska's Energy Independence Fund." He began on slide 15 and slide 16, stating that HB 154 would empower AHFC and AEA to work together on developing sustainable energy development tools. This would include the establishment of nonprofit subsidiary corporations and AEIF, which would be managed by AHFC's nonprofit subsidiary corporation. The fund would gain capital through the general fund and federal receipt authority. He displayed a list of the steps to be followed, if HB 154 were passed. 10:45:12 AM MR. BUTCHER, in response to a question from Representative Schrage, stated that AEIF would have its own board. 10:46:09 AM MR. GIALOPSOS commented that the proposed committee substitute would not make substantial changes and would conform the proposed legislation to the legislative drafting manual. He presented the sectional analysis of the proposed committee substitute (CS) for HB 154 [copy included in the committee packet], which read as follows [original punctuation provided]: Section 1: Adds a new subsection (AS 18.56.010(h)) acknowledging the public benefit of a subsidiary corporation in Alaska Housing Finance Corporation (AHFC) to assist in financing sustainable energy development. Section 2: Amends existing AHFC statutes (AS 18.56.086(a)) to authorize creation of a subsidiary corporation for the purpose of sustainable energy development. Section 3: Amends AHFC's statutes (AS 18.56.090(e)) to, in cooperation with the Alaska Energy Authority, create or work with public, quasi-public or nonprofit organizations that provide financial assistance for sustainable energy projects. 10:49:19 AM Section 4: Adds a new section to AHFC's statutes (AS 18.56.870) establishing the Alaska Energy Independence Fund (the Fund) and its operations. (a) Creates the Fund within AHFC and describes what moneys and assets would go into the Fund. (b) Outlines how the money within the Fund can be used, including for issuing loans and financing sustainable energy development projects, and for paying the costs of administering the Fund and enforcing the terms of its loans (c) Names AHFC as the fiduciary of the Fund, and allows deviation from the prudent investor rule to promote sustainable energy development in the state. Allows AHFC to disburse money from the Fund according to established laws governing the procedure. Requires AHFC to adhere to annual reporting according to Generally Accepted Accounting Principles (GAAP) (d) Requires AHFC to establish the financial terms of loans made from the Fund, and requires consideration of costs to the Fund and AHFC in the process. 10:54:43 AM REPRESENTATIVE PRAX asked how the public purpose was determined. MR. GIALOPSOS answered that creating a subsidiary corporation would give AHFC the ability to determine which energy projects would serve the public purpose. MR. BUTCHER added AHFC would give an annual report to the legislature. REPRESENTATIVE PRAX asked how one project would be compared to another. MR. BUTCHER answered that certain funding would be awarded for specific purposes by the federal government. 10:58:27 AM REPRESENTATIVE SCHRAGE asked why the prudent investor rule should be removed. MR. BUTCHER answered that it would provide flexibility to pursue certain projects that may not always be considered prudent, even if there was a federal incentive attached. 11:00:48 AM MR. GIALOPSOS continued with the sectional analysis of the proposed CS for HB 154, which read as follows [original punctuation provided]: (e) Allows AHFC to require deeds of trust on buildings subject to loans from the Fund as well as its real estate. (f) Allows AHFC to contract with the Alaska Energy Authority for technical expertise when evaluating sustainable energy development loans. (g) Restricts AHFC to loan guarantees without legislative approval to an amount less than $20 million. (h) Requires AHFC to consider the State of Alaska energy policy when managing the Fund, and prioritizing sustainable energy development on energy efficiency and renewable energy for residential, commercial, and community buildings. (i) Requires AHFC to administer the Fund according to regulations adopted for the Fund's management. (j) Explicitly states nothing in Section 4 creates a dedicated fund. Section 5: Amends the general provisions' portion of AHFC's statutes (AS 18.56.900) by adding a definition of sustainable energy development. Section 6: Provides an immediate effective date. 11:06:22 AM REPRESENTATIVE CARRICK asked if the federal funding for these types of projects can be expected in the long term. MR. BUTCHER answered that establishing a green bank would open the door to private sector investment. In response to a follow- up question, he said that just under half of the states in the U.S. have some type of green bank, most of which started with public dollars. 11:09:33 AM REPRESENTATIVE PRAX asked whether the subsidiary corporations are expected to continue after the end of federal funding. MR. BUTCHER answered that it would be determined by necessity. 11:11:20 AM REPRESENTATIVE SCHRAGE asked what type of projects would be considered by the fund. MR. BUTCHER answered that one example is the building of energy efficient housing units. MR. THAYER added that the size of projects would be limited by megawatts (MWs), but the fund would increase opportunities for renewable energy projects. He added that there have been no defaults on loans given to renewable energy projects. 11:15:12 AM REPRESENTATIVE SCHRAGE questioned whether the projects which could use the fund are ordered or on a general list. MR. GIALOPSOS answered that it is a general list. 11:18:42 AM REPRESENTATIVE CARRICK asked what types of entities the fund would work with. MR. BUTCHER answered that it depends on the size of the projects. Nonprofit organizations and homeowners would both be part of the equation. 11:21:55 AM REPRESENTATIVE MCKAY moved to adopt the proposed CS for HB 154, labeled, 33-GH1074\B, Dunmire, 4/11/23, ("Version B") as a working document. There being no objection, Version B was before the committee. [HB 154 was held over.]