SB 32-APPROP: ALTERNATIVE ENERGY REV. LOAN FUND  2:27:15 PM CHAIR EGAN announced SB 32 to be up for consideration. 2:27:44 PM MICHELLE SYDEMAN, staff to Senator Wielechowski, sponsor of SB 32, said that this measure would capitalize an existing loan fund designed to provide loans to businesses and Alaska non- profits interested in upgrading the energy efficiency of their buildings or installing alternative energy systems. This fund was originally created in 1978 to provide loans to homeowners for renewable energy systems. It was capitalized with $18 million and almost 3,000 loans were made. However, in 1986 the legislature started taking money out of the fund and the program became inactive soon thereafter. Since then, the Alaska Housing Finance Corporation (AHFC) has initiated two very popular programs, weatherization and home energy rebates, to help Alaskans keep their homes more efficiently and inexpensively. AHFC also offers residential loans to homeowners for efficiency upgrades. Through these programs the state is helping many Alaskans reduce their home heating costs. Yet, little is being done to help small Alaskan businesses and non-profits struggling with the same high fuel costs. Last year, when the Senate was crafting its omnibus Energy bill, many debated what could be done to ease the burden skyrocketing energy costs were imposing on businesses and non-profits across the state. The solution they arrived at was to expand the purposes of the Alternative Energy Loan Fund to enable businesses and non-profits to borrow money at a reasonable interest rate to pay for energy conservation improvements shown to reduce costs over the long run. SB 222, passed unanimously by the legislature last session, did just that. MS. SYDEMAN said they were here now to ensure that the fund created last year is capitalized. The purpose, of course, is to help Alaskan-owned businesses and non-profits to become stronger and in the case of businesses, more profitable. The second purpose is to enable the state to fulfill the goals of the energy policy the legislature adopted last year, one of which was to achieve a 15 percent increase in energy efficiency on a per capita basis by 2020. The achievement of that goal becomes even more important as the state contemplates substantial investments in energy production, transportation and cost equalization, such as construction of a bullet line, the Watana Dam or power cost equalization (PCE) program. She said there is high demand within the commercial sector for a loan fund of this sort. On February 15, the Alaska Energy Authority (AEA) closed the application period for its new Commercial Energy Audit Program funded with federal stimulus funds. There was a five-week application period and over 135 businesses applied for subsidized audits under this program. Participating businesses offered to voluntarily implement wide- ranging efficiency measures in exchange for acceptance, indicating a high level of need and commitment to saving energy and money. MS. SYDEMAN said that Alaskan businesses are hit not only by high fuel costs, but they also use twice the energy of businesses nation-wide. Businesses applying for AEA's commercial energy audit program reported average energy costs of $2.35 sq. ft. when it's $1.19 sq. ft. nation-wide. This difference puts Alaskan businesses at a disadvantage. There is ample evidence that investments in energy efficiency pay off quickly. For instance, in 2007, an Anchorage company invested $30,000 in energy efficiency improvements at its 21,000 sq. ft. building. The return on this investment has been 27 percent per year, far beyond the normal rate of return on many other investments. However, this substantial rate of return is consistent with what they have seen with residential energy efficiency investments. AHFC's Home Energy Rebate Program has reduced energy use by an average of 33 percent for almost 10,000 homes, saving each household an average of $1,535 annually. For every dollar spent on energy efficiency through both home energy rebates and weatherization, $.24 is saved annually. Comparable savings could be expected for businesses through this loan fund making them more profitable and competitive. This program would also create jobs. AHFC estimates 2,500 jobs were created from the Home Energy Rebate and Weatherization programs. Similar job trends could be expected from this loan fund. 2:33:25 PM MS. SYDEMAN said this bill proposes an initial capitalization of $10 million, which would enable the state to lend $30,000 to approximately 85 businesses each year on a revolving basis. It will be up to the Finance Committee to ultimately decide what rate of capitalization is appropriate and affordable given other state commitments and needs. 2:34:10 PM SENATOR BILL WIELECHOWSKI, sponsor of SB 32, said this bill attempts to close what is seen as a gap in energy assistance funding. Energy assistance funding exists for governments and individuals and they are simply trying to close the gap by including businesses. 2:35:10 PM MARY WALKER, Executive Director, Stewards of Creation, Fairbanks, said they are the only faith-based environmental stewardship non-profit in the state. She reported that 14 churches and 1 synagogue applied to the AEA's Energy Audit Program under the commercial side. She said a lot of congregations are spending a lot of money on energy. For instance, the University Presbyterian in Fairbanks is spending $32,000 a year for fuel and $18,000 in electricity and it is a congregation of 100 people. She said she liked this loan piece because it's not a handout, but rather a hand up. 2:37:11 PM DENNIS SWIDERSKI, owner, Orca Island Cabins, Seward, said he supported SB 32, because small businesses like his can benefit from funding earmarked for the development of alternative energy. He explained that his business is part of the ecotourism industry in Alaska. Because they are off the grid, they use solar power to provide the limited electricity on their one-acre island close to Seward. They carry their water to the island from the small boat harbor in Seward and pump it to the holding tanks under each cabin and use propane as fuel for the cabin heaters, on-demand hot water, kitchen ranges, et cetera. Their costs are quite large, but they are eco-friendly and many of their guests have expressed appreciation for that approach. MR. SWIDERSKI said they are at a financial crossroads, because the Department of Natural Resources (DNR) has authorized them to build an 80-foot pedestrian foot bridge connecting them with the mainland to build additional cabins there. They will need funding and a large part of that will be to enhance the solar system that they now use; a desalinator would be nice as well. CHAIR EGAN handed that gavel over to Vice Chair Paskvan saying he had to go to a budget close-out. 2:41:42 PM MARK MASTELLER, State Director, Cascadia Green Building Council, said they are a non-profit group and part of the U.S. Green Building Council that does education, training and promotion of high performance buildings in primarily the commercial and public sector. He said he supported SB 32 especially since it included measures to promote conservation efficiency in businesses and non-profits. These are the critical first steps that need to be taken before thinking about energy systems. "We don't want to waste any energy, whether it's fossil energy or renewable energy; so conservation and efficiency has to be done first." This funding will allow that to happen in the loan program. It will clear the way for the eventual use of renewable energy systems. MR. MASTELLER suggested it would be nice if this loan program required conservation and efficiency measures first, because that is what is the best return on investment and it's the best step to a world where everything can be powered on renewable energy. 2:44:07 PM DAVID LESH, owner, Gustavus Inn, Gustavus, Alaska, said this revolving loan fund is an important step for the state to help rural businesses adapt to rising energy prices and the need to keep costs low to compete with tourist destinations throughout the world. He said his family's business has been operating since 1965 and they have seen many changes regarding availability and cost of energy in their community. Currently they are paying in excess of $.30 kwh and over $4 gallon for heating oil. Some improvements have been relatively easy to do such as improving insulation; but he has more extensive improvements planned that require more time and money than he has available. MR. LESH said he is currently participating in the AEA's new commercial energy audit grant program and has agreed to implement energy improvements with a seven-year payback. The revolving loan fund is designed to work in conjunction with professional energy audits to ensure that money is being spent on responsible projects at responsible businesses. Access to low interest monies would make it much easier and more likely for him to finish the improvements identified in the audit. 2:45:54 PM JOHN WEDDLETON, representing himself, said he owns a small business in Anchorage with 20 employees. He said he also supported SB 32. He said his business is pretty typical of Anchorage businesses that are in fairly inefficient buildings. He related how a couple of years ago he substantially reduced his energy usage in his 5,000 sq. ft. concrete block warehouse. He prioritized his work based on an audit by Andy Baker. At the time, his warehouse was mostly empty and he was lucky to have the money to do the work. In 2008, he insulated the exterior walls, added ceiling fans, insulated an overhead door, added programable thermostats, did weather stripping, put thermal blinds on the windows and sealed cracks. He converted all the lights to T5 or T8s. The insulation cost about $9,500 and the lights about $3,500. As a result of these improvements, in the peak months there was a 20-25 percent reduction in both gas and the electric use. Before he did the work the warehouse was used mostly for storage and after he did that work he got four employees in there working regular business hours. The lights were on a lot more and it was kept quite a bit warmer. So the reduction was fairly substantial. At this point, there is a lot more to do, but it gets into a lot more money and longer payback times. He said if gas and electric went up 20 percent or more he would look for ways to cut those costs again. He said he was lucky to have a good cash flow when he needed to do the work, but a lot of businesses don't have the extra dollars. It's still a sensible thing for them to do. He said the quality of life in his warehouse has been improved substantially and that leads to better employee productivity, something that is hard to put a dollar value on. VICE-CHAIR PASKVAN said he had two dozen letters from individual Alaskan businesses supporting SB 32 and finding no further comments closed public testimony. [SB 32 was held in committee.]