(a) The power project fund is established as a separate fund. The fund shall be distinct from any other money or funds of the authority and includes only money appropriated by the legislature, proceeds from the sale of loans appropriated by the legislature, and money deposited under (g) of this section.

(b) The authority may make loans from the power project fund

(1) to electric utilities, regional electric authorities, municipalities, regional and village corporations, village councils, and independent power producers to pay the costs of

(A) reconnaissance studies, feasibility studies, license and permit applications, preconstruction engineering, and design of power projects; and

(B) constructing, equipping, modifying, improving, and expanding small-scale power production facilities that are designed to produce less than 10 megawatts of power, bulk fuel storage facilities, and transmission and distribution facilities, including energy production, transmission and distribution, waste energy, energy conservation, energy efficiency, and alternative energy facilities and equipment;

(2) to a borrower for a power project or for bulk fuel, waste energy, energy conservation, energy efficiency, or alternative energy facilities or equipment if

(A) the loan is entered into under a leveraged lease financing arrangement;

(B) the party that will be responsible for the power project or the bulk fuel, waste energy, energy conservation, energy efficiency, or alternative energy facilities or equipment is an electric utility, regional electric authority, municipality, regional or village corporation, village council, or independent power producer; and

(C) the borrower seeking the loan demonstrates to the authority that the financing arrangement for the power project or the bulk fuel, waste energy, energy conservation, energy efficiency, or alternative energy facilities or equipment will reduce financing costs for the project, facilities, or equipment below costs of comparable public power projects, facilities, or equipment.

(c) Before making a loan from the power project fund, the authority shall, by regulation, specify

(1) standards for the eligibility of borrowers and the types of projects to be financed with loans;

(2) standards regarding the technical and economic viability and revenue self-sufficiency of eligible projects;

(3) collateral or other security required for loans;

(4) the terms and conditions of loans;

(5) criteria to establish financial feasibility and to measure the amount of state assistance necessary for particular projects to meet the financial feasibility criteria; and

(6) other relevant criteria, standards, or procedures.

(d) The authority may adopt regulations to establish the standards, criteria, and procedures for making loans under this section, including regulations to establish reasonable fees for applications and loan origination, and charges for reimbursement of the costs of analyzing the feasibility of a project.

(e) Repayment of the loans shall be secured in any manner that the authority determines is feasible to assure prompt repayment under a loan agreement entered into with the borrower. The authority may make an unsecured loan from the power project fund to a borrower regulated by the Regulatory Commission of Alaska under AS 42.05 if the borrower has a substantial history of repaying long-term loans and the capacity to repay the loan. Under a loan agreement, repayment may be deferred for 10 years or until the project for which the loan is made has achieved earnings from its operations sufficient to pay the loan, whichever is earlier.

(f) A loan for power projects and bulk fuel, waste energy, energy conservation, energy efficiency, and alternative energy facilities or equipment

(1) may not be granted for a term that exceeds 50 years; and

(2) shall be granted at an interest rate that is not less than zero percent and that is the lesser of

(A) a rate equal to the percentage that is the average weekly yield of municipal bonds for the 12 months preceding the date of the loan, as determined by the authority from municipal bond yield rates reported in the 30-year revenue index of The Bond Buyer; or

(B) a rate determined by the authority that allows the project to meet criteria of financial feasibility established under (c) of this section.

(g) Loan repayments and interest earned by loans from the power project fund shall be deposited in the power project fund unless an appropriation to fund the loan directs otherwise.

(h) The legislature may forgive the repayment of a loan made from the power project fund for a reconnaissance study or a feasibility study when the authority finds that the power project for which the loan was made is not feasible.

(i) Money in the power project fund may be used by the legislature to make appropriations for costs of administering the fund.

(j) The authority may not enter into a loan from the power project fund for a major project unless it has legislative approval of the project and the amount. An appropriation for the loan that names the project constitutes approval required by this subsection. A major project is a project in which the cumulative state monetary involvement, through loans, grants, and bonds, is at least $5,000,000 or a project for which a loan of more than $5,000,000 has been requested.

(k) The authority may collect the fees and charges established under (d) of this section and shall deposit the money in the general fund.

(l) The authority may sell loans of the power project fund with legislative approval. The authority may use money in the power project fund to repurchase loans sold under this subsection that default. Money received by the authority from the sale of loans under this subsection shall be deposited into the power project fund under (a) of this section.