SB 17-ENERGY EFFICIENCY & POLICY: PUB. BLDGS  4:17:18 PM CHAIR HUGHES announced the consideration of SENATE BILL NO. 17, "An Act relating to the retrofitting of certain public facilities and community facilities; relating to the performance of energy audits on schools and community facilities; relating to the duties of the Alaska Energy Authority and the Alaska Housing Finance Corporation; creating a rapid economic recovery office in the Alaska Industrial Development and Export Authority; and relating to the state energy policy and energy source reporting by state agencies." She noted this was the second hearing and there was a committee substitute (CS) for the committee to consider. 4:17:37 PM SENATOR MYERS moved to adopt the CS for SB 17, work order 32- LS0187\B, as the working document. 4:17:52 PM CHAIR HUGHES objected for discussion purposes. 4:18:05 PM SENATOR TOM BEGICH, Alaska State Legislature, Juneau, Alaska, sponsor of SB 17, said Connor Owens will present the CS. 4:18:32 PM CONNOR OWENS, Intern, Senator Tom Begich, Alaska State Legislature, Juneau, Alaska, paraphrased the summary of changes from version A to version B. He stated the following:   Page 2, Lines 20-23:  This change clarifies that the energy audits the State will perform under this legislation aren't going to be large investment-grade audits. Instead, the audits are meant to be minimal, level-one [American Society of Heating, Refrigerating and Air-Conditioning Engineers] (ASHRAE) audits that can be performed either in person or virtually. The idea is that these more minimal audits will reduce the fiscal notes of this bill but still allow the State to determine if there are potential projects for energy savings. SENATOR BEGICH explained this change was a specific request from testifiers for a preliminary [Reporting and Planning System] (RAPS) virtual or another audit. The companies would do the real intensive audits once a need was determined. 4:19:37 PM MR. OWENS continued: Page 4, line 13:  Clarifies the new office being established, the Rapid Economic Recovery Office, is meant to use its expertise to support and contract for these bundled projects so that facilities don't have to navigate the retrofitting process on their own. This will be especially helpful for facilities with lower numbers of employees and rural facilities. So this just makes it clear that the new office is there to leverage its expertise to help communities and facilities with these projects. Page 4, lines 17-26:  This change aligns terminology with existing statute. It replaces "clean energy" with the definition of "renewable energy." This is meant so that we do not have to create a new definition for what energy sources the bill addresses and allows us to stay consistent with previous state statute. SENATOR BEGICH noted he had inadvertently transferred language from the Lower 48 to the bill and admitted he should have checked the statutes to see what the definitions were. 4:21:52 PM SENATOR MYERS stated he understands the idea behind the bill that spending a little money now saves more money later. He said what he is concerned about is the diminishing returns. For example, retrofitting a 50-year-old building with the expectation for quite a bit of savings, but retrofitting a 5- year-old building is another thing. He explained what he is concerned about is some of the language in the bill regarding the number of buildings and the dollar figure. He noted the previous presentation addressed the number of retrofits and the annual dollar savings. However, his concern is the possibility for spending more and getting less. SENATOR MYERS asked what he expects to be the end result. 4:23:05 PM SENATOR BEGICH replied he brought up the perfect question. He noted there were two issues that came up in the previous hearing for the bill, one was a suggestion from a testifier to address 50 percent of the buildings that are 5000 square foot or greater as opposed to a 25 percent. Part of the reason why he rejected the suggestion is because the number needs to be at a lower percentage precisely because of diminishing returns for the reason of not wanting to over extend the State in any regard. However, the second thingand more importantlythat is why the program is a public-private partnership in the bill. He detailed the way [Energy Service Companies] (ESCOs) work is you have to have a saleable product, so the initial work of the virtual auditor the audit that was described by Mr. Owens allows for taking a look at the structures to first see if they are even relevant in terms of a retrofit or a quality-grade investment. The second step after retrofitting determination is to bundle that to see if there is private entity interest; that is the whole point, no private company is going to invest in something with diminishing returns. SENATOR BEGICH explained the guarantee in the bill is that half of the [energy savings], 25 percent of the overall bill, would be for the reduction of energy priceswhich is where you would get to that $40 million savings mark over timeand 25 percent would go to covering the initial loan. The [Alaska Industrial Development and Export Authority] (AIDEA) only serves as a vehicle in a sense for managing the loan. The whole process protects the State from exactly what Senator Myers addressed. The State would not find itself in a situation where the investment is not attractive for a return and guaranteed savings for loan development. SENATOR BEGICH noted Mr. Hodgin may provide more detail. He said Mr. Hodgin has been actively involved in how the State did the ESCOs via the bill in 2010. The State has realized-roughly over a decade$40 million in energy cost savings. The real key is private entities are not going to invest in a product that does not give them a return and the State is guaranteed a return as part of that process. The bill only targets 25 percent of those buildings that are 5000 square feet or greater. CHAIR HUGHES asked Mr. Hodgin to provide his prospective. 4:26:05 PM CHRISTOPHER HODGIN, Engineer and Architect, Division of Facility Services, Department of Transportation and Public Facilities, Anchorage, Alaska, asked Senator Myers to confirm that his question pertains to the age and quantities of buildings, and program effectiveness on relatively new buildings versus older buildings. SENATOR MYERS answered yes. MR. HODGIN noted one of the interesting things the department has seen when retrofitting older and newer buildings over the last decade is that building technology is getting more complex and that results in desynchronization where new pieces of technology are not optimized. The department has seen some significant opportunity to improve complex systems in newer buildings. 4:28:00 PM CHAIR HUGHES removed her objection to the CS. Finding no further objection, version B was before the committee. 4:28:15 PM CHAIR HUGHES opened public testimony on SB 17. Finding none, she closed public testimony. 4:29:14 PM CHAIR HUGHES held SB 17 in committee.