Legislature(1995 - 1996)
05/04/1995 02:45 PM Senate FIN
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* first hearing in first committee of referral
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CS FOR HOUSE BILL NO. 17(L&C) am
An Act expanding the services that may be offered by an
electric cooperative to include sewer and water and gas
services when authorized by the Alaska Public Utilities
Commission, and to include direct satellite television
services; relating to officers of a telephone or
electric cooperative; relating to amendment of the
articles of incorporation of a telephone or electric
cooperative; and providing for an effective date.
Co-chairman Halford directed that CSHB 17 (L&C)am be brought
on for consideration. JEFF LOGAN, aide to Representative
Green, came before committee. He explained that the bill
amends Title 10 in three categories:
1. Expansion of the scope of services that can be
offered by electrical cooperatives to include water,
sewer, natural gas, and direct satellite
television.
2. Clarification of voting procedures for amendments
to articles of incorporation for electrical
cooperatives. New language clarifies how members
may vote either at the annual meeting or by mail.
3. Provision of a local option in the titling of
board members of electric cooperatives. Under
current law, board members are required to be
titled: president, vice-president,
secretary, and treasurer. Common practice is
for the presiding officer of a board to be
called the chairman. Some cooperatives use
other titles. Proposed changes allow them to
select the titles they wish to use.
Remaining sections, with the exception of the effective
date, are conforming changes.
Mr. Logan next directed attention to a draft SCS CSHB 17 and
voiced support, on behalf of the sponsor, for amending
language therein. Changes incorporated within the draft
include:
Page 2, line 1, removes inclusion of subsection (7)
from the citation of AS 10,25.020 (6) since there is no
need to include direct satellite television under
APUC regulation.
Page 2, line 25, subsection (6) utilizes Senate
language which is cleaner.
Page 2, line 28, subsection (7) makes clear where
direct satellite television services may be offered and
where they may not. It also provides a
definition.
Senator Randy Phillips voiced his understanding that the REA
has changed to the RUS (Rural Utility Services) in order to
obtain loans for provision of other utilities. Mr. Logan
concurred. The Senator then asked if there was objection
from gas, water, and sewer companies to expansion of rural
electrical cooperatives to other utilities. Mr. Logan
responded negatively. Co-chairman Halford voiced his
understanding that water, sewer, and gas services are
provided through a system but not certified or regulated by
APUC.
Co-chairman Frank voiced his understanding that it is not
anticipated that rural electrical coop provision of water,
sewer, or gas services would overlap areas where existing
utilities provide these services. The proposed bill will
only apply to areas where there in presently no such
service. Mr. Logan agreed that it is not the intent that
service areas overlap.
DAVE HUTCHENS, Alaska Rural Electric Cooperative
Association, next came before committee. As background
information he explained that the proposed bill represents
the first amendment to AS 10.25, the electric telephone
cooperative act, since the 1988 code revision. It contains
a collection of needed items due to a change in present
circumstances or the fact that some items were overlooked
when revision occurred.
Speaking to concern raised by Senator Phillips questioning
electric coop expertise in other utility areas, Mr. Hutchens
explained that "this section does not confer the right on
the electric cooperatives to go out and provide this
service." It merely places provision of services within
their corporate powers. It would then be legal for them to
engage in this business, if authorized to do so by the APUC.
Speaking to the change from REA to RUS, Mr. Hutchens
referenced combination of all rural utility loan programs
within the Dept. of Agriculture into one entity. The reason
for the change was to allow electric cooperatives that have
a good track record of management success to extend sewer
and water in rural areas where needed. For loans to rural
entities for small sewer and water systems that do not have
a good management record, the proposed bill would allow
rural electric coops to step in and provide management
services, where necessary, to protect assets built with USDA
loans. That is the national push behind the issue.
In response to concern raised by Senator Phillips, asking if
a rural cooperative could take over gas services. Mr.
Hutchens replied, "Absolutely not." The rural coop would
have to go before the APUC and make a case that they could
do the job better than Enstar. He then voiced his
understanding there is no chance they could do that.
Senator Rieger asked if certificates of convenience and
necessity are always exclusive. Mr. Hutchens answered, "In
practice, it has been . . . for sewer, water, gas, and
electric." Local telephone service has also been exclusive
in practice.
Responding to an additional question from Senator Phillips,
Mr. Hutchens explained that RUS provides ready funding to
rural electric coops for water and sewer projects. There is
$900 million in the federal budget for this year.
Senator Phillips again posed a question regarding expertise.
Mr. Hutchens pointed to common practice in a number of
states for the electric cooperative to also provide sewer
and water service. The management system is in place.
Specific expertise in sewer and water is then hired.
Noting that the Dept. of Environmental Conservation is
attempting to construct sewer and water projects in a number
of areas, Co-chairman Frank asked if cooperatives were
working with the department. He suggested that coops could
provide both management and maintenance expertise that was
lacking in the past.
Senator Sharp suggested that for small water and sewer
utilities that are now precluded from selling out to an
existing electric cooperative if they chose to "get out of
the business," the proposed bill offers an opportunity for
improvement of service by an entity with greater financial
capabilities.
Mr. Hutchens stressed that in Alaska cooperative members are
not "hungry after the idea of getting into sewer and water."
Members feel it is good to have authority to do so if the
right opportunity comes along, or it makes sense for the
coop to do so. Mr. Hutchens acknowledged that the Alaska
Village Electric Cooperative which services 50 villages in
the western part of the state is willing to take on whatever
services might be necessary to make their communities more
viable. Naknek Electric is also interested in being able to
provide sufficient natural gas for local service.
Senator Sharp MOVED for adoption of SCS CSHB 17 (9-LS0096\W,
Cramer, 4/26/95). Senator Rieger OBJECTED and inquired
concerning the difference between Senate and House versions,
specifically referencing new language at page 2, relating to
direct satellite television. Mr. Logan explained that
satellite television differs from cable in that programming
is received by a satellite dish and relayed to users. The
utility would not offer the service itself. Cooperatives
would "service" the service. They would provide
administrative and billing services. Mr. Hutchens added
that the National Rural Telecommunications Cooperative is
owned by a national collection of coops. NRTC has its own
programming package put together in direct negotiations with
programmers such as Disney.
Senator Rieger next questioned inclusion of the following:
to a location that is not part of an area
certificated by the Alaska Public Utilities
Commission to a cable television company on the
effective date of this Act.
Mr. Hutchens explained that areas cooperatives would like to
serve with direct satellite television are "the scattered .
. . housing areas in their electric service areas." As an
example, he cited areas in the Matanuska Valley, Kenai
Peninsula, Copper Valley, and rural areas outside of
Fairbanks where it is not feasible to have a cable
television system. The foregoing was added as a means of
assuring cable television companies that electric coops will
not be "poaching their territory." Coops would not be
serving areas that have cable television. Mr. Hutchens
acknowledged that the above does not forego direct satellite
television service in competition with cable delivery.
However, that would be done through "somebody like RCA-
Hughes" rather than by an electric coop.
End: SFC-95, #61, Side 2
Begin: SFC-95, #63, Side 1
In the course of further discussion of satellite television
delivery, Mr. Hutchens explained that the consumer would own
his or her own satellite dish. The coop would merely
provide billing services. Language within the bill is
intended to allow for provision of service "if and when the
satellite actually has Alaska in its footprint . . . . Two
years is the projection on that." Scattered housing would
be the market area. The benefit of coop provision of this
service rests in the value added service and negotiated
rates on programming packages through NRTC.
Responding to a question from Senator Rieger, Mr. Hutchens
advised that homes located in an area certificated to a
cable company, would fall outside the area that could be
served through a coop. If the area is not served by cable
when the proposed bill becomes law, it could be served by a
cooperative.
Senator Rieger inquired concerning the position of the
sponsor on the proposed amendment. Jeff Logan voiced
concern regarding passage of the legislation if the
amendment is incorporated. He then expressed a preference
for the draft SCS CSHB 17 as written. Senator Rieger said
he would not proceed against the wishes of the sponsor but
expressed concern over backing down because a regulated
utility "doesn't want the competition."
Senator Zharoff raised concern that in smaller communities,
provision of television services is a private enterprise.
He suggested that service by a utility would limit or
prohibit service by the private sector.
In response to a further question by Senator Rieger, Mr.
Hutchens explained that the cable television industry was
not convinced that language passed in the House bill would
provide sufficient protection against competition from
satellite service. New language contained within subsection
(7) at page 2 was thus incorporated within the Senate
committee substitute.
Senator Rieger MOVED to withdraw his proposed amendment.
Co-chairman Frank then MOVED for adoption, saying that
competition should be allowed. Regulation should only be
necessary where competition is not possible because of
economic reasons. Senator Sharp voiced concern that
competing services, regardless of technological advances, in
a small service area may dilute the number of customers
needed for the service to be viable. Senator Zharoff raised
a question regarding reversal of services provided by a coop
should a community or private enterprise seek to take over
service provision. Co-chairman Frank clarified that the
proposed amendment would not grant exclusivity to existing
cable operators relative to direct satellite television
program services. The change would merely open competition
to electric utilities that choose to provide the service.
Co-chairman Halford raised a question regarding
certification of cable television services, and discussion
of the issue followed.
Senator Sharp expressed concern over possible unequal
competition if one segment of the industry is certificated
and regulated by the APUC while the other is provided
authority by the legislature, through statutes, and bypasses
the regulatory process.
Co-chairman Frank said that the proposed amendment does not
go as far as he would like. He voiced a preference for
allowing technology to advance competition for the benefit
of the consumer.
In response to additional questions regarding regulation,
Mr. Hutchens advised that cable television companies that
serve ten or more customers are to be certificated by the
APUC. None of the companies are regulated in terms of
rates, unless consumers petition for economic regulation.
The company in Juneau is the only regulated cable service
provider in Alaska.
Co-chairman Frank cautioned that it is not good policy to
artificially restrict competition where technology is
allowing it to happen. Senator Zharoff questioned allowing
a utility to provide a service that is not governed by APUC
in possible competition with service that has undergone the
certification or regulatory process.
Co-chairman Halford voiced his understanding that the
proposed bill merely allows utilities to engage in a form of
competition that is presently available to any other entity,
since provision of television services is unregulated. The
Co-chairman then called for objection to adoption of the
proposed amendment. No objection having been raised, the
amendment was ADOPTED.
In response to a further question from Senator Zharoff, Mr.
Hutchens explained that the bill would simply grant utility
cooperatives authority to provide needed services not
provided by another entity.
Senator Sharp MOVED for passage of SCS CSHB 17 (Fin) with
individual recommendations. Senator Zharoff OBJECTED and
advised of need for additional review. Co-chairman Halford
called for a show of hands. The motion carried on a vote of
4 to 2. SCS CSHB 17 (Fin) was REPORTED OUT of committee
with zero fiscal notes from the Dept. of Commerce and
Economic Development, one from the Division of Banking,
Securities, and Corporations and the other from the Alaska
Public Utilities Commission. Co-chairmen Halford and Frank
and Senators Phillips, Rieger, and Sharp signed the
committee report with a "do pass" recommendation. Senators
Donley and Zharoff signed "no recommendation."
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