HOUSE BILL NO. 312 "An Act creating a low-interest loan program for homeowners who convert their homes to natural gas- fired heating; and creating the natural gas home heating conversion loan fund." Vice-chair Fairclough MOVED to ADOPT proposed committee substitute for HB 312, Work Draft 27-LS1301\E (Nauman, 4/4/12). Co-Chair Stoltze OBJECTED for discussion. 3:12:32 PM JOE MICHEL, STAFF, REPRESENTATIVE BILL STOLTZE, explained the changes included in the CS. He remarked that the CS was "structurally different" from the original legislation. Additional sections were rolled into Section 1. The word, "inspection" replaced "energy audit" throughout the bill. A registered mechanical contractor was authorized, along with energy raters to perform inspections. All references to "loan fund" were replaced with "loan program." On Page 3, lines 3-4 were added: "…shall be deposited in the general fund and may be appropriated for the loan program under this section or for any other public purpose." Representative Wilson introduced the legislation by reading the following: HB 312 will create a low-interest loan program, administered by the Alaska Housing Finance Corporation for homeowners who use oil, coal, or wood to heat their homes so they can convert to a natural gas, propane, electric, biomass, or district heat heating appliance. Originally, HB 312 would only provide loans for the conversion to a natural gas-fired heating appliance. However, through the committee process, HB 312 was expanded to include propane, biomass, electric heat, and district heat. The committee substitute for HB 312 now provides for a statewide approach for homeowners to convert to a more affordable and efficient heating method. Propane can be utilized in Alaska's rural communities. Biomass heat in the form of pellets is growing in popularity and could be implemented in the Rural Interior and Southeast portions of the State. Electric heat has now become more affordable in Kodiak and the Southeast regions of Alaska. Finally, district heat is available in communities that have combined heat and power plants, such as in Fairbanks' downtown coal plant where the by-product steam and hot water are pumped through a pipe system providing affordable and emission-free heat to customers. My office has worked carefully with AHFC to create a statewide program offering loans up to $7,500, at a 1% interest rate for a term of 10 years. The loans would only cover the cost of the heating appliance, and not the cost of materials and installation. Loans will be offered to qualified applicants who use either heating oil, coal, or wood as their primary heat source. The heat sources which the homeowner wishes to convert to must be readily accessible for use. HB 312 requires an inspection by either an AHFC certified energy rater or a registered mechanical contractor, who will confirm the heating method the homeowner uses, and provide an explanation of the potential energy savings the homeowner could see if they converted to one of the options available through the program. HB 312 will have additional benefits to communities who have been designated by the EPA to have unacceptable air quality levels. Currently, the Fairbanks North Star Borough has been designated by the EPA as a PM 2.5 nonattainment area. The low- interest loan program created by HB 312 would allow for residents of the FNSB to afford conversions to cleaner, more efficient heating methods to help abate the high levels of particulates in our air. Representative Wilson spoke to the energy rebate program. She noted that the energy rebate program could be used to recoup costs for a new gas fired appliance but reimbursement was dependent on a weatherization rating. Replacing doors, windows, and enhancing insulation recouped more costs on the rating system than a new heating source. She pointed out that the program provided loans and was not a giveaway. Co-Chair Thomas wondered whether the appliance loan must be paid before the house title could be transferred in the case of a sale. 3:17:34 PM Representative Wilson assumed that the loan applicant would repay the loan before the sale. JOHN ANDERSON, WEATHERIZATION PROJECT OFFICER, RESEARCH AND RURAL DEVELOPMENT, ALASKA HOUSING FINANCE CORPORATION, DEPARTMENT OF REVENUE, agreed that the loan would be the responsibility of the applicant. Representative Guttenberg noted that the legislation expanded inspectors to include mechanical contractors. He questioned whether there were sufficient contractors capable to do the work. Mr. Anderson affirmed and clarified that the department would follow the same regulatory process that already qualify the inspectors and follow the regulations in place that qualified the state mechanical administrator's license. Vice-chair Fairclough noted the indeterminate FN 1 (DOR) fiscal note. She wondered if the loan program was funded or if the legislation developed the structure. Representative Wilson affirmed that money for the loan fund was not appropriated. The legislation set up a mechanism for the loan fund. Vice-chair Fairclough asked whether one percent of the fund amount would adequately cover the administrative costs. Mr. Anderson thought that one percent was an appropriate estimate. Vice-chair Fairclough wondered how many homes were in Fairbanks and North Pole. Representative Wilson replied that approximately 21,000 homes qualified as a single family home. Co-Chair Stoltze noted the need in the Mat-Su as well. Representative Doogan discerned that the program provided zero interest loans. Mr. Anderson affirmed and added that the one percent interest would go back into the general fund. Co-Chair Stoltze WITHDREW his OBJECTION. There being NO further OBJECTION, Work Draft 27-LS1301\E was ADOPTED. 3:23:27 PM Co-Chair Stoltze OPENED public testimony. Co-Chair Stoltze CLOSED public testimony. Vice-chair Fairclough MOVED to report CSHB 312(FIN) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSHB 312(FIN) was REPORTED out of Committee with a "do pass" recommendation and previously published indeterminate fiscal note: FN1 (DOR).