CS FOR SENATE BILL NO. 337(L&C) "An Act relating to the powers of the Alaska Energy Authority to make grants and loans, to enter into contracts, and to improve, equip, operate, and maintain bulk fuel, waste energy, energy conservation, energy efficiency, and alternative energy facilities and equipment; relating to the bulk fuel revolving loan fund; relating to the Alaska Energy Authority's liability for the provision of technical assistance to rural utilities; relating to the Alaska Energy Authority's investment of the power development fund; repealing the electrical service extension fund; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken, noted that this legislation, which is sponsored by Senate Rules by the Request of the Governor, pertains to the powers of the Alaska Energy Authority and would amend statutory provisions of the Authority's Energy Loan Program (ELP). SARA FISHER-GOAD, Financial Analyst, Alaska Industrial Development & Export Authority (AIDEA) and Alaska Energy Authority (AEA), Department of Community and Economic Development, testified via teleconference from an offnet site, and stated that this legislation would allow the Power Project Fund (PPF) to authorize loans for waste energy and energy conservation, energy efficiency, and alternative energy facilities and equipment. Co-Chair Wilken noted that Members' packets contain an AIDEA/AEA letter [copy on file] dated March 16, 2004 and addressed to the Committee co-chairs, that outlines the projects affected by this legislation. Ms. Goad stated that the changes proposed to the PPF would expand the definition of eligible energy efficiency projects in order to include projects such as lighting retrofits. She also noted that the bill would repeal the Loan Committee that approves the PPP loans and incorporate the credit approval process that includes an appeal process to the Board of Directors, as currently utilized by AIDEA. Ms. Goad stated that another program affected by the legislation would be the Bulk Fuel Revolving Loan Fund (BFRLF) that provides "short-term loans to assist small rural communities in purchasing annual bulk fuel supplies." She qualified that while the Department of Law recently interpreted the definition of eligible borrowers to be communities and private individuals, the bill would allow funds to be provided to other entities such as corporations, cooperatives, and joint ventures. This expansion, she attested would "not expand the definition of eligible borrower beyond the long-standing interpretation and practice that included other entities such as corporations." Ms. Goad noted that while AEA has been investing the Power Development Fund since 1993, this bill would affirm its ability to do so by, with the concurrence of the Department of Revenue, providing AEA with the necessary statutory authority. She pointed out that all earnings of the Fund are remitted to the State's general fund. Ms. Goad noted that this bill would clarify AEA's general power of authority to issue grants and contracts in that, "as acting as an agent for rural communities, AEA manages power projects, bulk fuel projects and alternate energy projects." She noted that AEA receives and expends federal funds from entities such as the Denali Commission and the US Department of the Energy through the State's appropriation process. Ms. Goad also stated that the bill "clarifies that AEA's statutory mandate to provide technical assistance may not be used as an independent basis for tort liability against AEA." However, she noted that, "AEA would continue to be liable for negligence if it fails to use reasonable care in the providing the technical assistance." Ms. Goad stated that the bill would also repeal the inactive Electrical Service Extension Fund. She urged the Committee to act favorably in regard to this bill. Co-Chair Wilken noted that the repealing language regarding the Electrical Service Extension Fund is located on page seven, Section 12, of the bill. Furthermore, he noted that the Fund money, amounting to approximately $85,000, would be transferred to the general fund. Senator Dyson asked whether "changing lighting systems" would qualify as an energy efficiency project. JIM MCMILLAN, Deputy Director, Credit and Business Development, Alaska Energy Authority, Department of Community and Economic Development, testified via teleconference from an offnet site, and responded that, while projects of this nature have been denied in the past, this bill would allow for retrofitting of lighting to save energy costs to qualify for the PPF program. Senator Dyson understood therefore that transitioning "from incandescent lighting to something with a better power factor" would be allowed. Senator Olson asked for further information regarding the repealing of the Bulk Fuel Revolving Fund, AS 42.45.250(l)(1), as specified in the bill in Section 11, on page seven, line ten; specifically as this might affect bulk fuel storage facilities that store in excess of 10,000 gallons of fuel. Mr. McMillan responded that the intent of this language is to "clean up" State statutes as the definition of "bulk fuel storage facility" is not included anywhere in State statutes. He stressed that repealing the section would not have any affect on the program's operation. Senator Olson asked whether a minimum of 10,000 gallons of fuel must be purchased in order to quality for the Loan program. Mr. McMillan responded in the negative. MIKE HARPER, Deputy Director - Rural Energy, Alaska Industrial Development & Export Authority, Department of Community and Economic Development, testified via teleconference from an offset site to state that this legislation "is fairly straight forward" and would provide the Authority "with the ability to move forward and to carry out" the Loan Program's mission for "building projects in rural Alaska." Senator Bunde shared that he had heard from a fuel storage constituent who operates in Western Alaska and who had shared that there is a strong business interconnection between Western Alaska and Central Alaska. He stated that these fuel sales are important and are a priority in that, due to weather and being required to ship via barge, the fuel must be shipped before the onset of winter. On another note, he mentioned that another person, who was having difficulty in paying for fuel, wrote a letter saying that paying for his fuel would jeopardize his cable, as it would be shut off if he did not pay that bill. Senator Dyson noted that, in the past, he had conducted waste- heat recovery studies in approximately fifteen villages in Western Alaska, and he concluded that efforts to improve energy situations by utilizing such things as power plants waste heat to heat schools, is a "win-win situation." Therefore, he spoke to his conflict of interest and stated that he has "a lot of enthusiasm for what's being done." Senator Dyson moved to report the bill from Committee with individual recommendations and accompanying fiscal notes. There being no objection, CS SB 337(L&C) was REPORTED from Committee with zero fiscal note #1, dated December 18, 2003 from the Department of Revenue, and zero fiscal note #2, dated February 3, 2004, from the Department of Community and Economic Development.