Legislature(2001 - 2002)
06/24/2002 03:13 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE BILL NO. 3001
"An Act setting timelines for issuance of final orders
by the Regulatory Commission of Alaska, amending the
authority of the Commission to enter compromise
settlement orders, and extending the Commission's
termination date to June 30, 2006; and providing for an
effective date."
Vice-Chair Bunde MOVED to ADOPT work draft, 22-LS1841\C.
There being NO OBJECTION, it was so ordered.
In response to a question by Representative Hudson, Co-Chair
Mulder noted that the Regulatory Commission of Alaska has
already been funded in the operating budget.
WILLIAM M. NUGENT, PRESIDENT, NATIONAL ASSOCIATION OF
REGULATORY UTILITY COMMISSIONERS (NARUC), provided
information relating to HB 3001. He noted that the question
is whether the Regulatory Commission of Alaska should be
continued should it sunset. He noted that there are two
questions that should be addressed [in order to derive an
answer]. The first question is: "Do you want a regulatory
body to operate in Alaska, protecting the rate payers and
the shareholders who have invested in an Alaskan utility?"
This becomes a question of operation under a traditional
rate of return regulation or whether a choice is being made
to restructure the industry. He noted that he could not
answer the that question. The second question is: "Do you
want this Commission?"
Mr. Nugent observed that Alaskan commissioners are well
regarded by their colleagues outside of the state. They
aggressively push Alaskan issues. He thought that if the
previous questions were answered in the affirmative that the
Commission should be reauthorized now. He added that if the
decision was to discontinue the life of the Regulatory
Commission of Alaska that it would still be prudent to
extend its operation at this time. Regulated companies that
require authorization from the Commission to operate and
change the terms and conditions of their service offerings
and rates would be left in a questionable position with the
failure to extend. He noted that entities need to know where
to get information regarding regulation.
Mr. Nugent pointed out that the attention of the existing
Commission would be diverted by the uncertainty if it's
continuation after June 30, 2003 was in question. He
observed that the Regulatory Commission of Alaska could lose
staff [due to their uncertainty] and pointed out that issues
concerning continuance would be the same as for any private
industry whose future was somewhat cloudy.
Representative John Davies questioned if Mr. Nugent was
familiar with the Telecommunications Act. Mr. Nugent
affirmed that he had dealings with the Telecommunication
Act. He discussed the latitude of states once they have
decided that a market should be competitive to set rules
about bundling and rates of return. Congress left the policy
issues largely with the Federal Communications Commission
(FCC) and a substantial burden on state Commissions, who are
typically closer to each of the telephone companies
operating around the country to analyze and set total
element long-run incremental costs (TELRIC) rates and to off
comments to the FCC as to how competition was developing in
the state. This often involved extensive proceedings, as
occurred in Maine, between the telephone companies and the
various local exchange carriers as to how competition was to
develop. State commissions are charged to oversee
competition, which was envisioned and embodied in
agreements, and to monitor service quality standards to
assure that the public receives the services for which they
have agreed to pay. He noted that the entrance of numerous
competitors due to the Telecommunication Act, which created
a new competitive environment, has complicated issues. There
has been a three-fold increase in the volume of cases in
Maine during the past 11 years.
In response to a question by Representative Croft, Mr.
Nugent observed that Verizon is the dominant provider in the
state of Maine. It's service territory covers 85 percent of
the state. Verizon is dominant in all of the urban centers
and has approximately 90 percent of the subscribers
throughout their service area.
Representative Croft questioned if there is a dominant
carrier in most areas throughout the nation. Mr. Nugent
noted that there is a larger proportion of competition among
smaller carriers in New York State, particularly in New York
City.
Representative Croft stated that he is interested in what
could be done in establishing public policy on competition
and its limits or constraints. He noted that states could do
generally what they want in regards to the federal act if
they fulfill the two requirements. Mr. Nugent explained that
the federal act restricted the dominant carrier until
recently from entering interstate long distance service. In
order to win the right to enter the competition they were to
support a change in the nature of local telephone service so
that other local exchange carriers could come in to enter
the market. Competition for customers at the local level was
to be balanced by the opportunities for big companies to
enter into interstate service. Within that context, the idea
of protecting service quality remains with the state. If the
dominant carrier locally wants to be an interstate carrier
they must open their market to local competition. States are
asked to offer comments to the FCC as to the manner of
operation allowing local competition. Typically, states in
preparing their comments to the FCC, negotiate certain
assurances with the dominant local carrier to ensure that a
competitive environment would exist. He noted that the state
of Maine negotiated for a rapid response team to decide real
matters of competition between small local exchange
companies seeking to enter and grow in the market and
Verizon.
Representative Croft asked if the ultimate hook over a local
exchange carrier is a report to the federal government that
they have not conducted themselves competitively. Mr. Nugent
noted that the matter of entry is the issue. The state
continues to regulate according to state law. The gatekeeper
access to interstate service, which is subject to federal
law, is based on the company's willingness to support the
development of a competitive environment for local service.
Representative Croft questioned if a state could declare
that they have moved past the point of monopoly. Mr. Nugent
noted that there is nothing in the federal regulations that
requires a state to continue to regulate local telephone
companies.
Representative Croft asked if there is any local market
where the dominant carrier has less than 85 percent of the
market. Mr. Nugent promised to provide the information.
Representative Hudson observed that the commissions are
present to assure consumer access and fair cost. He asked
how the Maine commission is overseen. Mr. Nugent noted that
there is a standing legislative oversight committee in
Maine. Their commission meets at least once a week. He felt
that their commission does a good job. He suggested that the
same process goes on throughout the country.
Representative Lancaster asked if other regulatory
commissions oversee the same industries as Alaska. Mr.
Nugent thought that 40 - 45 states have multi-purpose
commissions that oversee electricity, gas, and
telecommunications industries. Some states divide out gas,
such as Texas. Maine has 1.2 - 1.3 million people and
receives approximately 1,000 cases a year. Cases include
consumer complaints but are typically requests for:
authority to serve, changes in task, approval of special
contracts, and rate cases. There is a working backlog but
they have not missed their statutory deadline. There are 57
employees including 3 commissioners in Maine.
Co-Chair Mulder referred to issues pertaining to timelines.
He asked what would be Maine's timeline for a complex case,
such as an electrical utility that impacts 70 percent of the
residents in the state. Mr. Nugent noted that, by statute,
rate cases must be resolved over a 9-month period. However,
arrangements have been made to work over a longer period. He
gave examples of some rate cases in Maine. The timeline can
be as long as a year or as short as five months. Some issues
are turned around in a week to 10 days, such as licensing
applications, special contract reviews and other routine
matters with a special urgency to meet market conditions.
The Maine regulatory commission has a budget of $5.25
million dollars. A million dollars of the budget is
available for consultants in areas where ongoing expertise
is not needed.
In response to a question by Representative Hudson, Mr.
Nugent guessed that 30 of the 1,000 cases are dismissed as
frivolous. He noted that even frivolous cases require a
fairly careful investigation under Maine law. He noted that
approximately 5 cases are completely frivolous.
Representative Hudson asked what would be the greatest
negative impact of sun-setting the Regulatory Commission of
Alaska. Mr. Nugent observed that responsibilities would have
to be reassigned by the legislature. He thought that it
would require the development of special court expertise.
The legislature might be lead back to the creation of
another commission. He expressed concern that consumers in a
relatively confusing market place may find themselves
without an entity to resolve disputes.
Vice-Chair Bunde questioned how fairness would be achieved
when a delay would cost one side or another money. Mr.
Nugent noted that the docket would be moved along tightly
and a timeline would be developed. He acknowledged that some
cases are difficult and some persist for a multi-year
period.
Co-Chair Mulder noted that the next testifier would be David
W. Wirick, National Regulatory Research Institute. Mr.
Wirick did a review of the Alaska Public Utilities
Commission in 1998 and a second report on the Regulatory
Commission of Alaska, June 13, 2000.
DAVID W. WIRICK, NATIONAL REGULATORY RESEARCH INSTITUTE
(NRRI) testified via teleconference. The NRRI is the
official research arm of NARUC. The 1998 report on the APUC
found that there were a number of areas in need of attention
including the: commissioner's staff, the commissioner, the
commissioner's relations, the time limits of orders (the
estimated backlog was between 500 - 750 orders), the quality
and speed of orders, increases in consumer complaint,
questions about the adequacy of consumer protection section
staffing, project filing and management information systems.
Mr. Wirick discussed the follow-up review conducted in April
2000 on the Regulatory Commission of Alaska. The review was
at the request of Commissioner Thompson. The report was
based on interviews with commissioners, staff and
stakeholders. The report found substantial improvement in
each of the areas identified as needing attention in the
1998 report. The report concluded that the Regulatory
Commission of Alaska was fairing far better than their
predecessor. Vertical communications had been improved.
Docket backlog was being worked on. An environment of mutual
respect among commissioners was established. Orders were
moving more quickly and were improved, but still needed some
work. An attempt was being made to end an over emphasis on
process and to streamline administrative process. The
consumer protection section had also been provided more
resources and appeared to be less stressed. Some areas of
concern remained, such as the high workload. He expressed
concern that it would be difficult for any agency to sustain
the workload over time. He also expressed concern regarding
the continued evolution of the public advocacy section and
the role of advisory staff. Staffing and the role of the
public protection section were discussed. There was a heavy
reliance on the efforts of the chairman. He summarized that
there were tremendous positive changes.
Vice-Chair Bunde asked if there is a rule of thumb template
regarding the commission size, number of commissioners, and
staff relating to the population size regulated. Mr. Wirick
did not have a working ratio.
Vice-Chair Bunde summarized that one of the concerns
regarding the Regulatory Commission of Alaska is the lack of
staff and compensation. Mr. Wirick noted that compensation
was not addressed.
Vice-Chair Bunde questioned the parameters of time
limitations. Mr. Wirick thought that 9 to 12 months is the
general limit applied to state actions.
Representative John Davies noted that Mr. Wirick had
concerns that the Regulatory Commission of Alaska had a high
workload. Mr. Wirick pointed out that the report indicated
that the workload was related to the backlog of cases and
that the commission was attempting to work through the
backlog. He could not comment on the current workload.
Co-Chair Mulder noted that the Regulatory Commission of
Alaska has been accused of having a difficult time in making
decisions in complex cases in a timely manner. Mr. Wirick
stated that he did not observed anything that would indicate
that the Commission would have difficulty making timely
decisions. There was a good working relationship and
interest by the commissioners to understand the complex
issues before them.
Representative Croft noted that there have been complaints
that the Commission files temporary, rather than final,
orders. Mr. Wirick did not find that the Commission issued
temporary orders. He did not have a list of stakeholders.
Representative Croft stated that he would like to know the
entities that were interviewed.
Representative Hudson asked how good management could be
assured and questioned the staff size. Mr. Wirick noted that
state's staffing size range from 25 - 1,000. Staffing size
varies regarding to function.
TAPE HFC 02 - 1, Side B
In response to a question by Representative Hudson, Mr.
Wirick noted that the Commission is a fairly independent
body. There is legislative oversight of budget function in
every commission that he is aware of.
KRISTY CATLIN, GOVERNMENT RELATIONS, AMERICAN TELEPHONE AND
TELEGRAPH, testified via teleconference in support of HB
3001. She noted that AT&T Alascom supports the
reauthorization of the RCA.
We support this reauthorizing for 4 years, or for the
longest period possible, such as the 2 years contained
in this committee's draft bill.
With the current state of telecommunications and market
forces in this state, not reauthorizing the Commission
and allowing it to go into its wind-down year, or even
a short reauthorization (for example: a one year
reauthorization) may not necessarily serve the best
interests of the process. Regulated industries need the
attention of the Commission; Critical decisions must be
made within the next year, otherwise the
telecommunications infrastructure of this state will be
in serious jeopardy. For those decisions to be made, it
is best for the Commission to have its attention
directed toward regulatory matters rather than toward
reauthorization, which would resurface in either case
again in January. For these reasons, AT&T Alascom
supports a minimum reauthorization of 2 years.
The RCA, if it is allowed to do so, is in the best
position to deal with complex regulatory issues because
of the expertise it has developed iii the areas over
which it regulates. This expertise does not come easily
or quickly. Amassing this expertise takes a great deal
of time and effort on the part of the Commissioners
themselves, but also on the part of Commission staff
and all affected industry players. If you play a sunset
out to its logical conclusion, the prospect of
educating another Commission is daunting and introduces
a great deal of uncertainty for all involved.
This committee has expended a great deal of effort to
create language that all interested parties can accept.
AT&T Alascom has reviewed the language. With slight
modification to include an interexchange (or long
distance) carrier in the make-up of the advisory
committee, AT&T Alascom supports the amended language.
Without an 1XC representative, a huge portion of the
RCA's regulated market is left out of the discussion,
Without an IXC representative on the committee; Alascom
could not support the amendment.
Co-Chair Mulder noted that an amendment was being drafted to
address the shortcoming discussed by Ms. Catlin,
MATTHEW FAGNANI, NANA DEVELOPMENT CORPORATIONS, ARCTIC
UTILITIES, ANCHORAGE, testified via teleconference in
support of HB 3001. Arctic Utilities has some important
issues that must be brought before the Regulatory Commission
of Alaska for approval. He expressed concern that movement
of the Commission to a sunset mode would prevent it from
taking on their new case. A delay would have a significant
financial cost to their company. Arctic Utilities supports a
minimum extension of two years. He urged that the committee
considered natural gas, water, electrical, sewage companies
and other non-telecommunication companies in their decision.
BUCKY WRIGHT, GENERAL MANAGER, AURORA ENERGY, FAIRBANKS,
testified via teleconference. He observed that they are a
small local utilities in Fairbanks regulated for heat and
electric. He expressed support for the proposed committee
substitute and a minimum extension of 2 years. Issues that
come before the Regulatory Commission of Alaska affect their
company. He emphasized the importance of timely resolution.
Mr. Wright noted that the proposed committee substitute
provides provision for monthly meetings and an advisory
committee. The advisory committee terminates once its work
is completed. The committee would provide a report and
address issues in the legislation. He spoke in support of
the advisory committee and its termination and questioned if
the committee could extend their scope. He suggested that
monthly meetings might be excessive.
DANA TINDALL, SR. VICE PRESIDENT, LEGAL, REGULATORY, AND
GOVERNMENTAL AFFAIRS, GCI, Juneau, testified in support of
HB 3001. She noted that GCI would support a 4-year
extension. She maintained that the Regulatory Commission of
Alaska is a good commission and vastly superior to the
former Alaska Public Utilities Commission. She acknowledged
that the Commission could be improved and maintained that
the timelines and advisory committee would be beneficial.
She pointed out that there is a learning curve in new
commissions. Starting over would not fix any of the problems
of those that have spoken against reauthorization. She
observed that the Commission has tried to resolve the
backlog and that sunsetting would cause further delays.
Ms. Tindall observed that the Telecommunications Act
directed the FCC to come up with a set of rules and
regulations. The FCC rules and regulations say how rates
should be set between carriers; how arbitrations should be
conducted; and to what extent they should be unbundled.
State legislatures or state regulatory commissions can work
to increase competition but may not decrease completion. She
maintained that the Regulatory Commission of Alaska is
necessary for business stability. Any utility in need of
public financing for capital funds needs a regulatory
commission or there is too much doubt and funding would be
jeopardized. There is no reason that any legislative changes
that need to be made to the Regulatory Commission of Alaska
can't be made at any time. Reauthorization does need to be
held up in order to make changes. It is not worth the cost
to the industry and the state in instability and the cost to
consumers.
Representative Croft asked where flexibility exists for
state policy. Ms. Tindall replied that, unless utilities
come to agreement themselves during the 135-day mediation
window, then rates that are set pursuant to the total
element long run incremental cost structure (TELRIC). The
rate that a new competitor pays an incumbent telephone
company are long run, which means that they are rates that a
new entrant with the most cost effective and least cost
technology would face to build a new network in the market.
The FCC sets this. The TELRIC cannot be changed and has been
upheld by the US Supreme Court.
In response to a question by Co-Chair Williams, Ms. Tindall
spoke in support of monthly meetings. She observed that
communication where all parties are present or have an
opportunity to be present could only improve things.
Co-Chair Williams asked if there had been trouble with some
of the competitor's claims or reports.
Ms. Tindall responded that there has been decisions that
they would have liked to see go the other way. The time
lines would be helpful. She noted that the timelines are
very quick for regulatory proceedings and suggested that
there may be due process complaints. In general, GCI is
supportive of the timelines.
Co-Chair Williams asked if the timelines would affect the
speed of the decisions being made. Ms. Tindall replied that
the timelines could go either way.
Representative Hudson asked for GCI's professional
assessment of the Commission. Ms. Tindall stated that the
Commission is good at prioritizing work in the consumer's
interest. Prioritizing means that not everything can be done
at once. She noted that the Alaska Public Utilities
Commission was not functioning well. The Regulatory
Commission of Alaska has a good prioritization of
proceedings and good focus on consumer issues.
Vice-Chair Bunde asked what should be changed regarding the
Regulatory Commission of Alaska. Ms. Tindall responded that
more authority should be delegated to the hearing officers
in order to spread the workload and empower them to speed up
decisions.
Co-Chair Mulder referred to settlement agreements. Ms.
Tindall explained that as long there is a right of finding
that the settlement is in the public interest it would be a
good thing. She stated that she would be concerned if the
Commission was forced to take any settlement agreement.
Representative Lancaster inquired if there were problems
with the education level of the hearing officers. Ms.
Tindall did not think this was an issue and voiced support
for the quality of the hearing officers.
Representative Croft asked if water and electricity could be
declared competitive and brought outside of the cost
shifting requirements.
Ms. Tindall observed that an incumbent telephone company
could petition to be declared non-dominant. There will
always be a need for some regulations under the
Telecommunications Act. Telephone systems must be able to
call one another. There needs to be regulations to call from
company to company. She doubted if states could do away with
telecommunication regulations, but they could treat
individual competitors with less regulatory oversight if
they make a competitive finding.
Representative Croft questioned the impact of a non-dominant
local exchange determination.
Ms. Tindall observed that ACS, as a dominant local exchange
company, could lower rates, but not raise them without going
through a full rate case. If they were deregulated as a non-
dominant carrier, then they would have the ability to raise
rates as well. This is the only difference, along with
certain bundling requirements (which aren't enforced anyway)
of regulatory treatment between dominant and non-dominant
carriers in the local telephone business today. Market power
is the standard for determination of dominance. Market power
does not just go on market share. It is the ability to raise
or lower rates and control price. It also has to do with
whether or not an entity has control over a bottleneck
facility.
Ms. Tindall explained that in the lower 48 states that Bell
marketing companies are not allowed to compete in the long
distance market until their local telephone market is opened
to competition. This is because they have control over a
bottleneck facility and control over the loop that goes to
customers' homes. A long distance carrier has to go through
the local telephone company to be able to carry its calls.
The Bell operating company, which owns the loop, has control
over the long distance market because they have control over
this essential facility that the long distance carrier has
to use. Alaska has the same situation but because the local
Alaskan companies are independents they fall through the
cracks. Alaskan independent telephone companies have always
been able to go into the long distance business. Incumbent
local telephone companies still have control over the
majority of those loops when competition begins. When a
customer in Juneau, where competition is just beginning,
decides to switch from ACS (which has 100 percent of the
market) to GCI, ACS has to physically unplug the customer
from its switch and connect them to GCI's switch. A set
market share for control is difficult to set. The dominant
carrier in Anchorage doesn't have as large a share. She did
not think that GCI would oppose a petition by ACS to be
deregulated as a non-dominant carrier.
In response to a question by Representative Croft, Ms.
Tindall stated that 9 out of 10 local competition cases have
been upheld. She observed that GCI opposed a tariff of the
Alaska Exchange Carriers Association. The Commission
rejected the tariff without a hearing and the Superior Court
remanded it back for a hearing.
DANIEL DIECKGRAEFF, VICE PRESIDENT, FINANCE AND RATES,
ENSTAR, NATURAL GAS COMPANY, testified in support of HB
3001. He noted that ENSTAR provides natural gas for heat to
about half of Alaska's population and serves over 109,000
homes. ENSTAR strongly supports a minimal 2-year
reauthorization of the Regulatory Commission of Alaska as an
essential governmental function. He spoke in support of the
timelines and new settlement language and pointed out that
frequent sunset reviews are disruptive. Time and resources
are taken by sunset reviews, which create staff uncertainty,
Commission and financial markets. He maintained that changes
could be proposed and made without sunsetting the
Commission. He noted that the Regulatory Commission of
Alaska has many important issues before it. He stressed that
abolishment of the Commission would result in a new
education process, wasted time, lost expertise, and cases
would pile up.
In response to a question by Representative Hudson, Mr.
Dieckgraeff noted that there are annual gas cost adjustments
and adjustments for growth, which come before the Commission
each year. Rate cases are infrequent. He noted that 1991 was
the last time that they had a rate case before the
Commission.
Representative Hudson asked if rates for Regulatory
Commission of Alaska administrative costs were in line with
the service. Mr. Dieckgraeff noted that costs have been
changed for the better.
Co-Chair Mulder reiterated that there have been complaints
regarding the Commission's ability to make complex
decisions. Mr. Dieckgraeff noted that they have had three
cases before the Commission. The first was issued in 1999
and resolved in 1999. The second case was resolved in less
than 45 days. The third case before the Commission was
resolved in a year, which was within the timeline
established by the Commission. They have a complicated case
currently before the Commission. He pointed out that the
Commission is working through a 700 case backlog.
ERIC YOULD, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC
COOPERATIVE ASSOCIATION (ARECA), in support of a 2-year
extension. He noted that ARECA members generate
approximately 90 percent of the power in the state of
Alaska. The Board of Directors advocates a two-year
extension of the Regulatory Commission of Alaska, contingent
on a number of concerns being addressed. He noted that HB
3001 addressed some of those ARECA's concerns. The proposed
committee substitute adopts timelines, provides a two-year
sunset and creates a committee that would act over the
course of one year to address many of the issue raises in
ARECA's resolution of February 22, 2002.
Mr. Yould presented suggestions for change. He noted that
the timelines would only apply to dockets opened after July
1, 2002. He expressed concern that dockets currently in the
system would be regulated to secondary status. He suggested
that the Regulatory Commission of Alaska be required to
review the dockets in the system and adopt a completion time
for each, consistent with the timelines.
Co-Chair Mulder questioned how a meaningful and realistic
timeline could be established. Mr. Yould suggested the
following language: The Regulatory Commission of Alaska
shall review all dockets initiated before July 1, 2002 and
issue a date within the timelines in section 1 above for
completion in accordance with the provisions of section 1.
He gave an example of a service jurisdiction case where
there is no more than a six-month period of time in which
the docket should be complete. An appropriate timeline would
be established based on the percentage of completion.
TAPE HFC 02 - 2, Side A
Co-Chair Mulder questioned if more staff is needed to reduce
the backlog. Mr. Yould hesitated to support additional funds
to reduce the backlog. He suggested that better management
by the Commission would reduce dockets better and added that
the Commission needs to know when to end the public process.
Mr. Yould observed that the advisory committee is heavily
loaded with representatives from telephone entities. He
suggested that an additional member be selected from the
electrical utility industry.
Representative Croft suggested that timelines could start
from July 1, 2003. Mr. Yould stressed that it would depend
on where the case was in the process. Adopting the time
lines from July 1, 2003 might slow a large case already in
the system.
Representative Hudson expressed concern regarding the
backlog. He questioned if it would be better to bring
additional resources to expedite the backlog. Mr. Yould
stated that it is difficult to say, but pointed out that
almost every community has it's own central station
generation.
Representative Foster referred to an audit by the Division
of Legislative Audit (copy on file.) The report suggests
that the Regulatory Commission of Alaska should either
require small water and sewage facilities to be certified or
establish a meaningful exemption system by regulation. He
pointed out that certifying 220 villages would increase the
backlog. Mr. Yould noted that the same level of economic
regulation as large utilities would make rural utilities
almost inoperable.
JIM ROWE, EXECUTIVE DIRECTOR, ALASKA TELEPHONE ASSOCIATION,
testified in support of HB 3001. Rural communities receive
$75 million dollars in federal funds annual for rural
companies. The Commission is needed to identify utilities in
rural communities to the FCC and to assure the FCC that the
money is being used for the purposes for which it was
intended. He urged a minimum 4-year extension. He stressed
the need for a regulatory commission. He acknowledged that
he has disagreed with many of the Commission's decisions due
to their interpretation of the Telecommunications Act. He
did not attribute any of the Commission's decisions to
inappropriate bias nor did he question their integrity or
their ability to do their job. He expressed concern
regarding section 7. He observed that the makeup of the
Commission is broad, but pointed out that if GCI is
represented that ACS should also be represented on the
advisory committee. He felt that the legislation was better
before the addition of section 7. He stressed the need for a
regulatory commission and maintained that the public
interest is being protected. He spoke in support of a strong
chair.
Representative Foster questioned if the Regulatory
Commission of Alaska worked to create monopolies in rural
areas. Mr. Rowe pointed out that fuel is more expensive in
rural areas; only universal service brings telecommunication
service to rural areas. There is not a great deal of profit
to be made in rural areas. The $75 million dollars in
federal support to Alaska comes from the rest of the United
States, as a means to provide national service. There is a
huge cost of providing services to rural areas.
Representative Croft referred to the universal services
issue. Mr. Rowe clarified that regulatory agencies must
certify that federal regulations are being met in order to
receive universal funding. He noted that Alaska companies
would not exist without the $75 million dollars in federal
support.
Co-Chair Mulder questioned if entities are afraid to speak
their mind before the Commission. Mr. Rowe did not think
that there was intimidation. He pointed out that two public
meetings are scheduled a month, which have been open. He
found the workshops helpful. He thought that monthly
meetings may be burdensome. He suggested quarterly meetings.
MARIE DARLIN, VOLUNTEER COORDINATOR, AARP, JUNEAU testified
in support of the legislation of the Regulatory Commission
of Alaska. She noted that their members rely on the RCA just
as they rely on the AARP.
We believe the RCA offers our members and all Alaskans
the best opportunity to achieve the following basic
consumer protections:
The ability to make informed CHOICES about utility
services. The assurance that sales practices and
advertisements are FAIR, so that they do not confuse,
mislead or frighten the public.
And, the Regulatory Commission of Alaska reassurance
that consumers receive ACCURATE information,
communicated clearly and in plain language so we
understand our rights and remedies.
The RCA assures consumers the right to affordable rates
and access to such basic necessary service as utilities
and communications.
Ms. Darlin pointed out that more than half of their members
are over 65 years of age and the issue is very important to
them. She emphasized the need for affordable and rural
access. She noted that the Regulatory Commission of Alaska
protects consumer rights and spoke in support of a minimum
2-year reauthorization.
BRUCE DAVISON, PRESIDENT, CHUGACH BOARD OF DIRECTORS, noted
concerns regarding the Regulatory Commission of Alaska.
The legislation creating the RCA included routine
sunset provisions, calling for an expiration date of
July 1, 2003. If the RCA is not reauthorized this
year, it must begin a year long phase-down period.
During this period, the 2003 legislature could still
consider an appropriate fix for the process as an
alternative to outright elimination.
As President of the Board of Alaska's largest electric
utility, I believe the RCA needs to accomplish its
mission in a timelier, less-costly manner. We need to
address the RCA's delays in deciding matters, the
manner in which the RCA controls its proceedings, and
its apparent reluctance to decide issues. These factors
carry a hefty price tag for Chugach consumers at every
level.
To date, Chugach Electric has provided over 60,000
pages of information to each of the four parties
involved in a legal discovery process in our pending
rate determination proceedings. At least another such
"discovery" is scheduled. Producing this amount of
paper is a costly and monumental task!
In other dealings with the RCA, we frequently find that
important issues are not resolved. We end up
considering the same issues in multiple proceedings. In
our current case, we are again considering a financing
issue that has been considered twice before. This type
of repetition is costly and unnecessary.
I believe that the existing process is inefficient and
our members are not receiving value from the regulatory
processes before the RCA. Chugach members pay for the
operation of the RCA in their monthly electric bill
through the regulatory cost charge - $360,000/year. In
addition, base electric rates are also impacted by
these inefficiencies (that is, costs are driven up by
the expenses of outside counsel and the heavy costs of
finding, organizing and packaging documents in the
discovery process to the tune of $800,000/year. In a
typical year, Chugach employees spend 7,700 hours - not
including outside consultants and attorneys. CEA loses
$200,000/month in lost revenues because RCA has not
ruled on our permanent rate increases.) The Chugach
Board of Directors and management has an obligation to
its members to assure that costs incurred are for the
benefit of its members. The current high costs of
regulation and more importantly, the diversion of key
staff resources, are benefiting no one.
Chugach is not the only utility that has concerns with
the RCA. Others have noted that the RCA has a larger
budget and more people than its predecessor, the APUC,
but still operates too slowly. The executive director
of ARECA, (Alaska Rural Electric Cooperative
Association) stated in a recent letter to House Finance
Co-Chairman Eldon Mulder: "...the regulatory process
is still broken and must be fixed. The present process
costs the electric utility industry much time and ...
money to run the regulatory gauntlet."
I firmly agree. In fact, we prefer no economic
regulation, as the elected boards of co-ops are
perfectly capable of balancing the needs of the
association with the needs of the member/owners. In
fact, in 31 of the 46 states that have co-ops, there is
no economic regulation, as it is optional.
I appreciate the willingness and involvement the Senate
Judiciary Committee has shown toward addressing the
problems that plague the RCA's ratemaking process and
welcome a more thorough examination of all the issues
involved. Addressing the ineffectiveness of the RCA's
current regulatory process will ultimately benefit all
consumers. I believe there are solutions to the
problems we are encountering. These solutions can be
worked out before the next legislative session
convenes.
JOE GRIFFITH, GENERAL MANAGER, CHUGACH ELECTRIC, testified
in support of a review of the ruling process. He stated that
Chugach does not think that the Regulatory Commission of
Alaska looks anything like the Easter Bunny and acknowledged
that money [from requested rate increases] would come from
the pockets of their consumers. He observed that Chugach
Electric is a big electric utility and that there are
experiences across the board. There are experiences on both
sides of the question. He clarified that they are not
complaining about rulings, but are asking for a review of
the processes by which the rulings are derived. He noted
that money lost [because RCA has not ruled on their
permanent rate increases] is taken directly out of the
economy of the entire Railbelt area.
Mr. Griffith recalled the most difficult case they faced,
which was opened in 1996. The case was under APUC and was
the product of a settlement agreement. The agreement worked
for about a year before the Regulatory Commission of Alaska
was established and picked up the case. He explained that
they were then in the process of dealing with three
simultaneous rate cases. He emphasized that rate cases are
demanding undertakings for a company that is in business,
not to do rate cases, but to provide electric service. The
first hearing was held in September 2001. He acknowledged
that the Regulatory Commission of Alaska inherited the case.
A decision was given six months later in March 2002. The
rate review still in process.
Mr. Griffith reviewed the 2000 Test Year Rate Case, in which
they are currently involved. He stated that he can document
$600,000 dollars in direct expenditures associated with the
case. The case was filed in July 2001 and he does not think
that there would be a decision prior to the next spring.
Mr. Griffith did not believe the Commission controls their
proceedings well. He pointed out that the Chugach Electric
Company has created over 60,000 pages of discovery for four
participants after two rounds. They submitted approximately
5,000 pages last week in the third round and he anticipated
that there would be a forth round and possibly more. He felt
that the Commission has the tendency to make the least
permanent decision in many circumstances, so nothing goes
away. Issues are not resolved and "any time you show back up
in front of the Commission somebody can bring this back up
and the problems resurfaces and you have to litigate it
again." He noted that a financing issue that they thought
had been resolved twice before was now back before them. He
explained that the Commission dealt with the financial issue
once before in a separate docket: deciding whether or not to
investigate a claim. It was closed, finding no basis for a
claim, but they allowed consideration of the issue in the
case that has been open for six years. The claim was again
rejected but is now back in the year 2000 Test Year Case. He
suggested that the Commission has a problem with finality.
The Regulatory Commission of Alaska sets the price of the
service and the service as been sold at the time of
generation, therefore it is difficult to go back and fix the
problem. He noted that the utility cannot recoup for the
Commission's inability to rule on increases. "We don't get
that bite of the apple if we didn't make our authorized rate
of return in the past, we don't get a second chance, but we
can be order to go back and pay it back to the customers…"
Mr. Griffith clarified that they are not saying, "Throw them
out." He acknowledged that the Commission provides a good
public forum and that they are needed to adjudicate boundary
issues. He maintained that a "good, hard scrub of the
process and procedures" is needed. He maintained that one
way to fix the problem is to "keep the heat on the process
that they are now, I think, are feeling fully, that is the
last year in existence." He pointed out that similar
occasions occurred in 1994 and 1998. He urged the Committee
to make the operations more efficient and effective.
Co-Chair Mulder noted that Mr. Davison had not offered
testimony in other hearings on the legislation. Mr. Davison
responded that the Board was reluctant to take a public
position on the issues, "for what we felt are some very
obvious reasons". He pointed out that they "live or die" by
the decisions of the Regulatory Commission of Alaska. He
explained that the Board decided to act after it had
conducted a fairly extensive analysis of the internal costs
that they and their ratepayers experienced due to the
actions of the Regulatory Commission of Alaska. The decision
was not easy and was debated in many executive meetings.
Their first public position was in conjunction with the
ARECA resolution, which was passed in February. He assured
the Chairman that they were not contacted by outside
entities, asking them to come forward.
Co-Chair Mulder questioned if Chugach has specific
recommendations to make, which the Committee could use to
address their concerns.
Mr. Davidson recommended that the oversight committee be
established before a decision is made regarding
[reauthorization of] the Regulatory Commission of Alaska.
After a six-month review, the [advisory] committee could
offer a recommendation to the legislature. The committee
could identify conditions for reauthorization. He added that
the legislation does not provide a hammer over the
Regulatory Commission of Alaska. He maintained that
timelines and reporting requirements are optional and under
the discretion of the Regulatory Commission of Alaska.
Co-Chair Mulder responded that Mr. Davidson underestimated
the ability and willingness to of the legislature to respond
to concerns as expressed by those that are regulated. He
noted that the House Finance Committee has reflected in
legislation reasonable concerns brought before it. He
stressed that the Committee would act on specific
suggestions. He maintained that timelines are as strong as
possible and pointed out that a timeframe has been included
to evaluate the timelines. He observed that it is fair to
bring forth criticism, but pointed out that it is also fair
to offer suggestions. He noted that no other entities have
had difficulty with the Regulatory Commission of Alaska's
ability to make timely decisions. He questioned why Chugach
is different.
Mr. Griffith was not sure that Chugach Electric was
different. He acknowledged that the company has complex
issues and large wholesale customers that have a motivation
to delay rate increases. They have not received a rate
increase since 1994. He stated that he could provide records
demonstrating excessively long delays by the Regulatory
Commission of Alaska and maintained that delays are a matter
of record. He reiterated that the fact that they have large
wholesale issues is the likely reason the Regulatory
Commission of Alaska finds it more difficult to deal with
their issues. He added that telephone wars, if they are
broken down begin to look similar.
TAPE HFC 02 - 2, Side B
Vice-Chair Bunde pointed out that if reauthorization is
delayed that the Regulatory Commission of Alaska would go
into a wind down mode. He questioned if it would be counter
productive. Mr. Davidson felt that further review would be
worth a six-month delay. Vice-Chair Bunde clarified that the
Chugach Electric Company has reported its monthly loss [due
to a delay in the rate increase] at $200 thousand dollars.
Co-Chair Mulder pointed out that the advisory committee
would be composed of the same entities that had testified in
support of reauthorization. Mr. Griffith expressed
confidence that the advisory committee would come back with
a reasonable answer. He indicated that Chugach Electric is
willing to accept the decision of the advisory committee.
Mr. Davidson stressed the importance of allowing Chugach
Electric to have input to the [advisory] committee.
Co-Chair Williams observed that testimony indicated that
there had been workshops and asked if Chugach Electric had
participated. Mr. Griffith stated that they had not found
the workshops productive.
Co-Chair Williams emphasized that communications help
resolve issues. Mr. Griffith stressed that it is with great
trepidation that anyone speaks against a commission that
controls their regulation. He noted that they cannot talk to
the Commission once a rate case is before them.
Co-Chair Williams asked how the heat could be kept on the
issue if the Commission is shut down. Mr. Griffith responded
that it would add a measure of concern to the body that is
being scrutinized by virtue of knowing that they have a
finite date by which something has to happen. He referred to
the reorganization of 1994 and concluded that there was
little disruption. Co-Chair Williams pointed out that if the
Regulatory Commission of Alaska is not reauthorized that
they would shut down and not be talking to anyone in order
to fix problems. Mr. Griffith stressed that it did not
happen that way in 1994 when the same thing happened to the
APUC.
Representative Hudson pointed out that the Alaska Public
Utilities Commission transitioned immediately into the
Regulatory Commission of Alaska. If that Commission is
sunsetted, there needs to be another place to go. He
reminded them that there is no other regulatory agency to
take over the current cases. He stated that he was "nervous"
about sunsetting the Commission without consideration of all
the pending cases.
Mr. Griffith stated that his point was on the 1994
reauthorization of the APUC, in which the same process and
same decision point was based. He stressed that it worked
out okay. He acknowledged that the Regulatory Commission of
Alaska was standing in the wings in 1998. Many of the cases
[before the APUC in 1998] are still not adjudicated. He
clarified that they are not saying sunset them in the strict
sense of the word: "chop off their head as we did with
APUC." He stated that they are saying: "let's fix the
administrative problem we are having there." He acknowledged
that other people might not be having problems, but asserted
that it has cost the Railbelt a lot of money and heartache
to resolve the issues.
Representative Croft summarized that the best result for
Chugach Electric would be for the legislature not to
regulate their rate structure and instead rely on the coop
structure to regulate the rate. Members would determine
whether their operations were efficient and whether rates
were too high. Mr. Davison agreed. Representative Croft
noted that Chugach Electric proposes that they be excluded
from the jurisdiction of the Regulatory Commission of
Alaska. Mr. Davison agreed and pointed out that 21 other
states have done so.
Co-Chair Mulder note that it would be a significant policy
change. He believed it was worthy of exploration and
consideration, but noted that it could not be done in a
three-day period.
Representative Lancaster commented that they need someplace
to go next. He agreed nothing would be accomplished by
sunsetting the Regulatory Commission of Alaska. Mr. Griffith
agreed it would be difficult to get the issues all together
in a short time period but emphasized that it would be
possible to put together a review group that would be able
to address the issue before January 2003 to look at
complaints and successes. He did not think that there would
be a six-month hiatus. He emphasized that the starting point
would be an assumption of reauthorization, but that the
administrative process would look at goals and objectives in
terms of timelines.
Representative Lancaster observed that they had not made
these proposals during hearings of the Senate Judiciary
Committee and thought that it should have been brought
forward earlier. He referred to the $300 thousand dollar
study. Co-Chair Mulder clarified that the study was approved
in FY 02 and the RFP has been issued.
Representative John Davies thought that as a coop, they had
the ability to seek exemption from economic regulation by a
vote of the membership. Mr. Griffith replied that they had
not sought authorization [for exemption from economic
regulation]. He did not think that the situation was
sufficiently broken to warrant a vote. He acknowledged that
it would be a "tough sell" to convince members. It is still
an option.
Representative Whitaker summarized that section 7 was not
acceptable to the Chugach Electric Company and that all
decisions should be held in abeyance. Mr. Davison clarified
that section 7 would be in conjunction with the Commission.
He did not mean to suggest that all decisions be held in
abeyance. The concept of section was acceptable, however,
they would like several changes. Section 7 would allow the
chair of the Regulatory Committee to appoint the [advisory]
committee. He would prefer that the committee be appointed
by a combination of the legislative and executive branches,
which would be more neutral in his view. He pointed out that
electric utilities would only have one voice out of the
seven positions. The Commission would still have two of the
seven positions. He would prefer two electric utility
members and no members of the Commission. He could see no
reason to have two Commission members on a committee that is
trying to decide what changes should be made to the
Commission. He added that the deadline under section (d) is
October 31, 2003, which is 18 months. He felt that the
advisory committee could perform a satisfactory job in a
shorter period of time.
Representative Whitaker asked if they understood the
difficultly of the legislature's ability to determine
changes needed to regulate the operations. Mr. Griffith
stressed that there is no one better to assess how they are
being regulated than those that are regulated.
Representative Whitaker stressed that the consumer has to be
protected. He reiterated his question regarding section 7
and asked if Chugach had a problem with keeping the
Commission in effect while solutions are worked out. He
thought that it would be a dynamic process, working toward a
more positive result. Mr. Griffith stated that the problem
with section 7 is that the chair is appointing the committee
to investigate themselves. He acknowledged that otherwise it
could work and business could continue as usual.
Representative Foster referred to the cost of discovery and
losses from rate cases. He asked if these expenses are being
passed on to the consumers. Mr. Griffith replied that the
total regulatory bill runs 1.5% of their total revenues.
Thirty-one states do not have regulations and are not
excluded. Representative Foster questioned what besides
supply and demand would protect consumers. Mr. Griffith
noted that cooperatives have elected boards, which must
answer to their electorate.
Representative Whitaker referenced economic issues not
subject to regulations. He questioned if Chugach Electric
would recommend that the wholesale sale of power not be
subject to regulation. Mr. Griffith affirmed and maintained
that their board is capable of setting their rates. He noted
that consumers could purchase power from other entities. He
discussed entities, which buy power from Chugach Electric.
He stated that they would run the typical rate case and hold
similar hearings themselves. The Superior Court would be
available for adjudication.
In response to a question by Representative Whitaker, Mr.
Griffith did not think it was realistically possible to keep
members at a lower rate schedule than wholesale customers.
Representative Croft observed that cooperatives currently
have the ability to opt in or out of regulation. Mr.
Griffith explained that Title 10 requires an affirmative
vote to withdraw from regulation under the state entity. The
option to return would remain by vote.
Co-Chair Mulder noted that the Legislative Budget and Audit
Committee produced a report on the Commission's ability to
meet their mission. He pointed out that Chugach Electric had
the ability to make comments to the Legislative Budget and
Audit Committee. Mr. Griffith stated that they expressed
their concern to the auditor.
WES CARSON, ALASKA COMMUNICATION SYSTEM, testified in
opposition to the reauthorization of the Regulatory
Commission of Alaska. He maintained that the regulatory
status quo is unacceptable. He emphasized that their
concerns and concerns expressed by many other utilities
throughout Alaska must be addressed by the Legislature in a
thorough and comprehensive manner before the RCA is re-
authorized.
Mr. Carson noted that his testimony would relate primarily
on the four ACS local telephone companies that build and
maintain the Public Switched Telephone Network, serving 75
percent of the State's population. These ACS companies are:
ACS of Anchorage (formerly ATU); ACS of Fairbanks (formerly
FMUS); ACS of Alaska (serving Juneau); and ACS of the
Northland (serving the highest cost and most remote of our
service areas).
Mr. Carson discussed their concerns relative to substantive
telecom policy and law. He discussed the Anchorage
Interconnection Agreement. The Interconnection Agreement
between General Communications, Inc. ("GCI") and Anchorage
Telephone Utility ("ATU) was approved by the Alaska Public
Utility Commission ("APUC") in January 1997 [in Order U-96-
89 (9)]. It established the terms for local telephone
competition in Anchorage, including the rate that would be
charged for the ("UNE") loops. The UNE loop is the telephone
circuit or line connecting a customer with the Public
Switched Telephone Network.
In the 1997 order, the APUC established a temporary UNE loop
rate of $13.85 per month. In the Commission's own words,
"all prices in the arbitrated interconnection agreement are
temporary in nature and will require a full study based upon
a cost methodology to be determined by this Commission at a
later date."
Mr. Carson noted that ACS of Anchorage, Inc., as the
successor to ATU, sought, but failed to obtain, an agreement
with GCI for new cost-based rates. ACS then asked the RCA to
set new rates in January 2000, arguing that the then three-
year old rate of $13.85 was so low as to effectively
subsidize competition in Anchorage. This non-compensatory
rate, gives GCI a cost of goods advantage over ACS.
The RCA, on March 6, 2000, opened a docket to set new rates,
and expressly recognized that the existing rates were both
temporary and "not based upon an accepted forward-looking
cost methodology." Nevertheless, the RCA took no action on
the open docket. Finally, a year and a half after requesting
new forward-looking rates, ACS asked for at least a new
"temporary" rate.
The RCA held a hearing during the latter part of 2001 in
which ACS submitted extensive evidence supporting a UNE loop
rate of $24.00 per month. Mr. Carson observed that ACS
requested an "interim and refundable" increase. This means
that in the event a finally adjudicated rate was less than
the interim rate, ACS would refund to GCI any overpayment -
thereby protecting GCI from economic harm. At the hearing,
GCI's counsel made an oral representation - unsupported by
any cost studies submitted in connection with the hearing -
that their models could not justify a rate greater than
$14.92. The RCA agreed with GCI, despite the absence of any
supporting evidence, and issued an order granting an interim
refundable rate of$ 14.92.
Mr. Carson stressed that after five and a half years ACS has
never had a rate in compliance with federal law. In fact,
ACS has been unable to obtain even a schedule for resolving
this matter. And, as their submitted cost studies indicate,
ACS is still not receiving adequate compensation for UNE
loops.
Mr. Carson discussed the termination of ACS rural
exemptions. Telephone companies are classified as "rural"
under the Telecommunications Act when their costs are very
high. With a rural exemption companies do not have to
interconnect and lease their loops and other facilities to
competitors. State Commissions may terminate a rural
exemption, but only, if the state Commission finds that it
is technically feasible, is not unduly economically
burdensome, and would be consistent with universal service
to do so.
Mr. Carson observed that GCI requested in 1997 that the APUC
terminate rural exemptions. The APUC placed the "burden of
proof' on GCI and found that the economics of
interconnection competition would be unduly burdensome on
the companies. The APUC therefore ruled that the exemption
should be preserved.
Mr. Carson explained that GCI appealed the order and the
Alaska Superior Court remanded the case back to the APUC
with the instruction to place the burden of proof on ACS.
The APUC did so, then terminated the rural exemptions of the
ACS companies and ordered interconnection with GCI on June
30, 1999. He noted ACS appealed the APUC's decision to the
new Regulatory Commission of Alaska and without a hearing;
the RCA sustained the termination of the rural exemption.
In July 2000, the 8th Circuit Court of Appeals, in a
decision that was binding on all other circuits, held that
the burden of proof must be on the competitor, not the rural
telephone company, and that the economic burden on the rural
telephone company associated with competitive entry had to
be considered.
Mr. Carson observed that GCI appealed the decision to the
U.S. Supreme Court to review on the specific issue of burden
of proof. The U.S. Supreme Court denied the GCI request,
leaving the 8th Circuit's decision on these matters as the
law of the land. Yet the RCA refused to comply with the law,
stating: "The 8th Circuit's ruling on the assignment of the
burden of proof in a rural exemption proceeding does not
persuade us to revisit that issue here." He maintained that
this was a clear case of the RCA ignoring a federal decision
that did not comport with its own policy to force
competition in rural areas. He noted that ACS has appealed
the matter to the Alaska Supreme Court, where it is now
pending review.
Mr. Carson noted that the Regulatory Commission of Alaska
also terminated the exemption for ACS' most rural company,
ACS of the Northland, despite GCI's testimony in 1997 and
again in 1999 that it was seeking interconnection only in
North Pole and not anywhere else in the ACS of the Northland
service territory. He emphasized that there has not been any
specific evidence introduced on the impacts of competition
relative to the economic burden resulting from
interconnection or regarding universal service in small
communities such as Seldovia, Ninilchik, Delta Junction and
Nenana.
Mr. Carson discussed the Interconnection Agreements in
Fairbanks and Juneau. As a result of the termination of the
rural exemption, ACS was been compelled to permit GCI to
interconnect and lease UNE. In sharp contrast to its
dilatory handling of the ACS request for legal UNE loop
rates in Anchorage, the RCA very promptly set rates for
Fairbanks and Juneau in response to a request by GCI. The
actual ACS cost for an average loop in Fairbanks is about
$33.50. The RCA, however, set a UNE loop price for Fairbanks
of $19.19 - giving GCI a cost of goods that is just 57% of
the ACS cost.
At the time it terminated the rural exemptions, the
Regulatory Commission of Alaska stated that "negotiations
regarding appropriate UNE pricing can achieve an acceptable
level of economic impact" and promised that it would play a
continuing supervisory role to ensure that the "economic
burdens borne by the incumbent carrier in a market where
local competition is newly introduced are not too great."
The Company testified in the Fairbanks rural exemption
proceeding that economic harm would result from a UNE loop
rate as low as $27.30. The RCA flatly rejected the Company's
economic harm argument, declaring: "That UNE price is
unrealistically low." He maintained that the RCA then
promptly arbitrated a rate of $19.19.
Mr. Carson discussed rate case proceedings. He maintained
that many utilities have expressed concern about the level
of effort and resources required to adjudicate rate cases
before the Regulatory Commission of Alaska. He observed that
ACS shares this concern. The current ACS rate cases were
mandated to commenced on July 1, 2001. He anticipated that a
rate sometime in 2003, based on data that will then be three
years old. This matter has already cost ACS roughly $1.8
millions to adjudicate the case and they expect the full
proceeding to cost approximately $3.0 million.
Mr. Carson pointed out that earlier this month, the
Regulatory Commission of Alaska issued a depreciation
decision in the rate case proceedings that appears to
conflict with the U.S. Supreme Court's decision this May in
Verizon v. FCC. The U.S. Supreme Court criticized attempts
to minimize depreciation and slow depreciation rates, yet
that is precisely what the RCA has ordered. The depreciation
rates established by the RCA for ACS are not only much lower
than the rates employed by its competitors, but these rates
appear to be significantly lower than any other telephone
utility in Alaska. In fact, they appear to be lower than any
known depreciation rate for any telephone utility, big or
small, anywhere in the country.
Mr. Carson maintained that this is exactly the opposite
result from what one would expect in the most competitive
marketplace in the nation where there is heightened pressure
to modernize equipment or lose customers. The effect of this
decision will be to leave ACS burdened with capital tied up
in stranded, obsolete facilities while the competitors
invest in newer technologies. Many utilities have expressed
fears that testimony against the four-year re-authorization
of the RCA could result in retaliatory rulings by the
Commission in the future. He questioned if ACS has been the
first victim.
Mr. Carson stressed that the "quid pro quo" for the
regulation imposed on the ACS companies should be an
opportunity to earn a return on their investment. The RCA
can compel ACS to build and serve - but they have no way to
assure a return on their investment. He stressed that the
Commission claimed "sovereign immunity" when ACS sought to
have a matter under the Telecommunications Act reviewed by a
federal district court. He asked: "Where is justice when the
Commission refuses to be held accountable for their
decisions? And why wouldn't state Commissioners absolutely
want to have the fullest review of their decisions to make
sure that what they are doing is in compliance with the
Telecom Act and appropriate policy and public interest?"
Mr. Carson observed that ACS has continued to invest in the
network in the hope that the Regulatory Commission of Alaska
would, through their current rate case proceeding and the
Anchorage UNE proceeding, permit them to earn a reasonable
return on their investment. He observed that they had been
disappointed thus far.
Mr. Carson explained that ACS was seeking depreciation rates
of 9.30 percent, which is comparable to their primary
competitor's depreciation rate. He pointed out that GCI
argued against their depreciation rate - not the RCA's
Public Advocacy Staff. Staff relied entirely on GCI to
formulate a position and the RCA reduced ACS's rate from the
existing 7.80 percent to 4.78 percent, which was remarkably
close to the GCI recommendation of 4.49 percent.
Mr. Carson expressed concern with the frequency in which the
RCA seems to side with GCI. He stated that they had reviewed
Commission decisions on disputed issues before the RCA from
July 1999 to the present. In those matters where GCI
advocated a position, the RCA ruled in GCI's favor 81.3
percent of the time.
Mr. Carson stated that legislators must carefully review the
current regulatory regime before reauthorizing the RCA. "The
Legislature must assure that state regulation of utilities
promotes the public interest, and that every utility
receives fair and open, unbiased, and rational treatment
that encourages continued investment in Alaska's
infrastructure."
Mr. Carson noted that ACS makes the following
recommendations to the Legislature relative to the proposed
reauthorization of the RCA:
1. Immediately establish a Legislative Oversight
Committee to monitor the RCA 's actions and to
formulate recommendations for consideration in the 2003
legislative session. The charter of the Legislative
Oversight Committee should be to assure that regulatory
policy is aligned with long-term public interest, that
regulatory processes are completed in a timely fashion,
that due process is afforded to all, and that
substantive law is being applied appropriately.
2. Use the findings and recommendations of the
Legislative. Oversight Committee, along with testimony
provided in these and related legislative committee
hearings, to guide the 2003 Legislature's deliberations
of the proposed re-authorization of the RCA. The
Legislature should also utilize the State
Telecommunications Study as it considers the
appropriate statutory, regulatory and policy directions
necessary to guide the regulators in telecommunications
matters (see attachments).
3. Require that the chair of the RCA be rotated, so
as to spread the responsibilities and prevent a single
Commissioner from exercising undue influence.
Mr. Carson stated that they were concerned about a perceived
bias against ACS and the possibility of retribution against
ACS by the RCA in current and future regulatory orders as a
result of their testimony. "Consequently, and in light of
the significant power currently vested in the RCA's chair,
we think it would be appropriate for another commissioner to
be appointed to the position of chair and to ask that
Commissioner Thompson disqualify herself from matters
relating to ACS." [Mr. Carson's entire written testimony is
on file.]
Co-Chair Mulder questioned why ACS did not offer their
comments earlier in the process. Mr. Carson stated that they
were reluctant to offer criticisms and acknowledged that
they had lost an opportunity to make comments. They were
contacted and interviewed, late in the session, by a
reporter of the Anchorage Daily News. He maintained that
after they expressed their concerns publicly other utilities
stepped forward.
Co-Chair Mulder noted that he had heard that [ACS] did not
have to worry about the House side because they had a block
on the Senate side and that they would not consider any
testimony on the House side. Mr. Carson responded that he
had meet with and briefed several House members including
Representative Murkowski and Representative Berkowitz.
Co-Chair Mulder noted that ACS is the first entity that had
debated or argued against decisions as opposed to process.
He pointed out that the legislature is not the decision
makers "in this game; just like we may be angry at times
with the Board of Fish because we don't always appreciate
and support their decisions. None the less, as a Body, we
have delegated that authority to them." The authority for
regulatory oversight has been delegated to the Regulatory
Commission of Alaska. He questioned how he could address
concerns reflected based on decisions.
Mr. Carson responded that it would be appropriate for the
Legislature to offer policy direction to guide the
Regulatory Commission of Alaska, so that they are not in the
position of establishing policy, but rather implementing it.
He observed that the Telecommunication Act at the federal
level was a sweeping change in philosophy and pointed out
that has been no corresponding change at the state level. He
maintained that it would be appropriate for the Legislature
to consider both statutory change and policy direction to
guide the Regulatory Commission of Alaska.
Vice-Chair Bunde summarized that ACS and Chugach Electric
have problems [with the Regulatory Commission of Alaska].
TAPE HFC 02 - 3, Side A
Mr. Carson clarified that they are not proposing that the
current people be thrown out. He acknowledged that there are
some good and talented people there that are well
intentioned and trying to the best thing for the state. He
suggested that if policy were made by the legislature and
the statutes were clear, that then there would be direction
for the regulatory Commission.
Vice-Chair Bunde noted that there is a fine line between
providing legislative oversight and micro managing.
Co-Chair Mulder questioned how much state communication
standards could deviate from the federal Telecommunication
Act. Mr. Carson emphasized that he is not suggesting that
anything be written contrary to the Telecommunication Act.
There are certain discretionary decisions the Regulatory
Commission of Alaska has made that might be appropriately
addressed in statute, including many procedural and due
process issues.
Representative Croft noted that the original legislation was
a sunset renewal of an agency. He questioned if the
Legislative Budget and Audit Committee auditor had contacted
ACS during the audit process. Mr. Carson stated that he did
not know of any contact. In response to a question by
Representative Croft, Mr. Carson noted that ACS is still the
dominant carrier, but that they have less than 60 percent of
the residential market. He spoke to the issue of dominant
carrier and carrier of last resort. He noted that they have
wrestled with these issues. As carrier of last resort they
are required to build facilities to new subdivisions. There
is no reciprocal obligation on their competitors. If they
were relieved of carrier of last resort and dominant status
there might be a bidding process with contractors to see who
would build out to a subdivision. Under current law, they
would be precluded from the kind of access given to their
competitors. Competitors are not required to allow ACS on to
their network.
Representative Croft concluded that if ACS petitioned to
remove the dominant carrier status that they would lose the
obligation to have others ride on their wires but they would
not gain the right to ride on their competitor's. Mr. Carson
clarified that under the Telecommunications Act as the
incumbent local exchange company they are required to
interconnect in Anchorage. Dominant status is not the issue.
He explained that if they were relieved of dominant status
and carrier of last resort obligation, and were effectively
deregulated for rates, than they could compete more nimbly
against GCI and AT&T. A process similar to the FCC
requirements for interstate rates would be appropriate.
Rates would be posted on websites and be in effect 24 hours
later.
Representative Croft questioned the affect of a change in
their dominant status. Mr. Carson stated that he would
respond in writing. Representative Croft questioned if the
legislature, as state policy makers, could establish a
different rate or depreciation structure than the one used
by the Regulatory Commission of Alaska. Mr. Carson explained
that federal law does not mandate the depreciation rate; the
state commission establishes it. The state legislature could
establish principals by statute that would govern the
setting of the depreciation rate or structure.
Mr. Carson explained that the legislature could require that
unbundled network element loop rates be established on the
carrier's actual forward-looking cost, which they would
support. It would be consistent with the Telecommunications
Act, FCC regulations, and recent Supreme Court rulings to
say that the rates should be based on a forward looking cost
or efficient technology. In determining what the model
yields, the inputs relative to costs have to reflect the
actual rate of the carrier and not be based on the average
lower 48 rate, even with an Alaskan cost differential. He
mentioned that the actual cost of the carrier should be used
and be consistent with the Telecommunications Act.
Representative Hudson thought they were advocating
substantive policy and legislative changes to eliminate a
string of unfair decisions that affect his company. He
stated that he had never seen substantive changes occur in a
short period of time. He observed that the testimony will be
a part of the public record. He summarized that they are
asking the legislature not to reauthorize the Regulatory
Commission of Alaska without these substantive changes. He
reiterated that it is impossible to make substantive changes
in a 3 - 5 day period. The decision must be to determine
what should be done with the Commission. He added that it
would not be good public policy to sunset the Commission.
He concluded that the problem cannot be fixed within this
time frame and voiced support for continuation of the
Commission.
Representative Whitaker recalled previous concerns voiced by
PTI, the previous ACS Company regarding local access, which
did not cover the charge of service. He noted that it was
made clear during public sessions that ACS would be unable
to compete because the amount that could be charged for
local access would not cover the cost of operations and
maintenance. He asked why ACS wanted to purchase the company
given those voiced concerns. He recalled that ACS indicated
that they could offset concerns with efficiency, new
services and long distance service. Representative Whitaker
noted that everything that ACS anticipated happened.
Mr. Carson pointed out that the old PTI companies in their
rural areas offered up wholesale competition, where service
would be discounted and allow it to be resold by
competitors. This is a different economic effect than the
interconnection competition where they are required to lease
the UNE loop. He maintained that the economics of
telecommunications are arcane and strange. In a wholesale
competition arrangement, most of those wholesale structures
work. Rural exemptions were terminated. Instead of wholesale
competition the issue was interconnection competition. The
form of interconnection competition, specifically the UNE
loop rates received through arbitration and the Commission
were 57% of the actual cost of the loops. There has been a
negative financial implication for the properties as a
result.
Representative Whitaker reiterated that there were numerous
conversations regarding the uncertainties during the sale.
There were a number of "negatives" associated with
maintaining ownership of the local exchange. He remembered
that it was expected that the "landscape" would change
significantly. He asked what the "surprise" was that
affected the dynamic. Mr. Carson replied that there was a
benefit to both the Telephone Company and Alaska because
there was certain support being provided to those properties
in the lower 48 states. By consolidating those properties
jobs could be brought to Alaska and economies of scale would
be achieved. These things have happened, but there is a $33
dollar forward looking cost, which they believe is about the
same, but they are only receiving $19.19. Plus, because GCI
has been granted a certain status by the Regulatory
Commission of Alaska they also take the universal service
fund. This places ACS at a significant disadvantage that
could not have been envisioned. There is approximately $10
dollars in universal service funds per line in Fairbanks
that is portable. He explained that GCI pays ACS $19.19
dollars, but they receive $10 dollars from the universal
service fund that is no available to ACS to build and
maintain facilities. Universal service funding, which
maintains construction of high cost loops in areas like
Fairbanks is diverted to someone that is not building loops,
which is a dramatic affect on ACS.
NANETTE THOMPSON, CHAIR, REGULATORY COMMISSION OF ALASKA,
spoke in support of the proposal and responded to previous
comments. She observed that interexchange carriers are
excluded [from the advisory committee], as are pipelines,
refuge and steam heat. In response to comments that there
are two representatives of the Commission [on the advisory
committee], she clarified that there one is a representative
of the public advocacy section, which is independent from
the Commission in terms of decision-making. She stressed
that it is important to include a representative for
consumers, which could be fulfilled by the public advocacy
section or another entity. She noted that recommendations
were made to divide electric representation between the
Railbelt, rural area and ARECA. There are significant
differences between the interests of rural electric
utilities and those in Railbelt areas. She questioned if
other industry organizations should be included if ARECA
were included. She reiterated that there is a significant
difference between local exchange carriers in urban and
rural areas.
Ms. Thompson stated that the provision for regular monthly
meetings would be fine, but that they would be scheduled
after one of their public hearings. They must balance
between the time spent working on cases and process.
Ms. Thompson referred to section 5, prior dockets. There are
currently less than 400 open dockets. She thought that it
would be more productive to issue orders setting a
procedural schedule on any docket open by January 1, 2003.
Ms. Thompson referred to the Commission's appeal record. She
noted that any utility could challenge a decision in court.
The Regulatory Commission of Alaska has had 11 of its
decisions reviewed by judicial bodies. Decisions by the
Regulatory Commission of Alaska have been upheld in 10 of 11
cases. The appeal process is an important indicator in how
the Commission is doing. The decision that was reversed
referred to process and was remanded for further hearings.
Ms. Thompson clarified that the 271 process (referred to by
Mr. Nugent) never applied in Alaska. The Anchorage market
was opened immediately in 1996 based on Congress's
definition of rural verses non-rural market. The rest of the
State was not open to competition until the Regulatory
Commission of Alaska was petitioned. The Commission issued
decisions to open Juneau, Fairbanks and other areas of the
state. That decision is pending appeal to the Alaska Supreme
Court.
Representative Croft asked if there was a Superior Court
determination. Ms. Thompson explained that there were two
Superior Court determinations. One was issued the last day
that the APUC was in operation. The request was for
reconsideration not appeal. All five Commissioners
participate in requests for reconsideration and read the
whole record. That decision was appealed to the Supreme
Court.
Ms. Thompson referenced testimony regarding open dockets.
There were 960 open dockets in the previous year. The
Commission has 61 employees, but also regulates pipelines
and refuge. The Regulatory Commission of Alaska has not
asked for increased staff, but has tried to increase the
efficiency of the process.
Ms. Thompson discussed two open regulation dockets [which
could affect the workload of the Commission]. One would
allow interexchange carriers, which are below a certain
level, a registration process instead of certification.
These cases are a significant burden on the Commission. The
second docket is in regards to uncertified water and sewage
village systems. The Regulatory Commission of Alaska
maintains that many of the village systems do not need the
same level of oversight as a WWU. The RCA Alaska has asked
questions with a goal toward developing regulations that are
more suitable for that scale of system.
Ms. Thompson referred to comments by Chugach Electric. She
noted that there is a letter from the Homer Electric
Association, which explains the other side of the story
(copy on file.) She was not comfortable talking about open
dockets. There was an interim rate increase provided for
that case in the amount of 2%. She referred to comments by
Mr. Carson. They have appealed decisions by the Commission.
She did not think that the legislature was the way to settle
open and pending appeals and urged that the court be given
time to decide the matter.
Ms. Thompson emphasized that decisions are based on the full
application of the law. They have the responsibility to make
a record. The Commission is not for or against any
particular utility; their job is to protect the interest of
consumers and to fairly apply the law. The
Telecommunications Act states that state commissions are not
supposed to be setting interconnection prices based on in
bedded costs. Rates are supposed to be based on a forward-
looking cost model. The Anchorage case was decided before
ACS bought that exchange and shortly after the
Telecommunication Act was passed. The FCC had not yet
adopted the total element long run incremental cost
structure. Years after ACS acquired ATU they were told to
change the pricing structure; this continues to be an open
docket.
In response to a question by Vice-Chair Bunde, Ms. Thompson
pointed out that the [advisory] committee is not just
composed of phone companies. It will be up to the members of
the Committee to determine if they are protective. Phone
wars are not fought amongst all the phone companies in the
state. She maintained that there is a balance amongst the
industries.
Vice-Chair Bunde noted that ACS assumed the risk. Ms.
Thompson agreed. She referred to the efficiencies argument.
At the time of the acquisition, the Commission was told that
operations would be more efficient. The Commission is
supposed to understand what beneficial impacts there were
from consolidation.
Vice-Chair Bunde asked about the Commission's agenda. Ms.
Thompson replied that her directions come from legislative
statute and federal telecommunication law, without bias for
or against any company. All decisions are the product of at
least three Commissioners. No case is decided by one
Commissioner alone.
Vice-Chair Bunde pointed out that there is discontent. He
asked for a solution. Ms. Thompson stated that the
Commission would like to hear from the utilities on the
process. Section 6 is a good idea to formalize the process.
She indicated that an Advisory Committee report would be
helpful as long as it is balanced and has a specific
mission.
Representative John Davies thought that the points of
contention is interim versus final decisions. He asked if it
is a fair criticism that the Regulatory Commission of Alaska
too often comes down with interim decisions that cannot be
taken to the bank. Ms. Thompson observed that, under the
statute, anyone can ask for an interim rate increase. A
decision is made that mostly likely they will prevail and
recover at least that much. If they are wrong in the end the
consumer would receive the money back. A utility will file
for a rate increase knowing that it cannot be granted during
the 45-day period due to a lack of information. She observed
that ACS received a 24 percent interim rate increase in
local rates and 8 percent on the UNE rate. Chugach received
a little less than 2 percent.
Representative John Davies asked if there is a way to
achieve final decisions quicker. Ms. Thompson replied that
it depends on the other parties involved. She noted that
requirements for the utilities to file all the information
up front could be more stringent. It is not uncommon for the
RCA to get schedules without all the information of amended
filings. The process could go faster if they received a
complete filing on day one. She noted that in the Chugach
case that there are other big companies involved that have a
right to have a say.
Representative John Davies referred to the UNE loop cost. He
summarized that they are being asked to install copper wire
without a rate return. Ms. Thompson explained that in-bedded
costs are what the utility has spent to put the cost in.
TAPE HFC 02 - 3, Side B
Ms. Thompson discussed in-bedded costs. Phone companies in
the state have an in-bedded cost of what they spent to put
the facility in. If the facility were to be replaced the
assumption would be that they would use the same equipment
and spend the same amount. The FCC model uses forward-
looking costs. She observed that technology costs are
reducing and that technology is expanding. The intent was to
encourage companies to innovate and to do things that would
lower cost and utilize new technology. A competitor can
enter a market by one of three ways: they can build their
own facility, purchase wholesale prices, or interconnect and
rent the loops. The intent is to set the price so that a
competitor would have to make an economic choice. If the
price is too high and they can build something cheaper
themselves then the existing network is going to lose
revenues. The intent was to keep the telecommunication
network moving forward.
Representative John Davies asked if there is anyway to make
the playing field more level. He suggested that there is a
one sided "deal". Ms. Thompson agreed that the notion of
dominant versus non-dominant could be reviewed upon
petition. The way of regulation has changed and needs to
continue to change as markets transition through
competition. Consumer complaints have increased
dramatically. The Regulatory Commission of Alaska doesn't
spend as much time on tariff filings in competitive areas
because they assume that if there is a certain level of
market penetration then the market will control the cost. It
is important to ensure that rates are fair and non-
discriminatory. Representative John Davies observed that the
Regulatory Commission of Alaska has the authority under
federal law.
Representative Foster observed that the Commission has been
accused of retaliatory actions. Ms. Thompson noted that
there are three commissioners on each case and emphasized
that they would not retaliate on any case.
In response to a question by Representative Croft, Ms.
Thompson noted that the Telecommunications Acts talks about
incumbents and competitive carriers. There is an obligation
for incumbents to open up their network. The issue is
unresolved. She noted that there has been facilities based
competition through alternative technologies. No one else
has put in wires.
Representative Croft noted that problems occur if the rate
is set too high or too low. Ms. Thompson noted that low
prices would not be fair to the incumbent and competitors
would not have an incentive to build their own facilities
and take advantage of new technology. No one is putting in
copper wire accept ACS. Representative Croft questioned if
the price in Anchorage is too low. Ms. Thompson did not
think that the price was the only issue. She noted that AT&T
wireless had a local option for a while. She pointed out
that there is a test neighborhood for use of the cable
technology in Anchorage. She added that customers are needed
in order to build a new network. The intent was that the UNE
platform strategy would be transitional, to protect the
interest of incumbents by providing them with interim
revenue and allow competitors to obtain relationships with
customers and establish a base.
Representative Croft observed that federal formulas can be
applied differently, but questioned how much discretion the
state has to set different formulas or rate structures. Ms.
Thompson noted that federal law directs UNE rates. They are
applied on a state level, and there is some flexibility
within the guidelines set by the FCC and the U.S. Supreme
court to figure out what methodology would be used, but the
FCC determines what the prices are supposed to reflect.
Different states have used different models but they all
have to fit the mold. None have used the model developed by
ACS. The Commission sets depreciation rates for every
utility in the state. The depreciation rate is how a utility
recovers their investment. The rate of which they are
allowed to recover is based on a number of factors.
Representative Croft questioned if there is more competition
in the local exchange in Anchorage than any place else in
the United States. Ms. Thompson affirmed that there is more
local exchange competition in Anchorage than in any other
area. She noted that there were no Bell companies. Alaska
did not have to go through the 271 process. She estimated
that the national local exchange competition rate was 10
percent.
Representative Croft questioned how much deference is given
to the Commission's determination. Ms. Thompson noted that
factual decisions are given deference by the court based on
the Commission's area of expertise. The court looks at
whether the Commission's decisions are supported by the
record. The Commission is not given deference on legal
decisions.
Ms. Thompson noted that the way the Commission sets UNE
prices for the Juneau and Fairbanks markets is on appeal
before the state of Alaska Supreme Court.
Representative Croft noted that the docket and number of
persons to service the docket is used as a measure of
efficiency. He asked if docket is a good measure or if it
rewards delay: the bigger the docket the more people that
can be justified. Ms. Thompson clarified that she was not
only referring to the docket. Consumer cases were also
included; the Commission has over 600 consumer cases a year.
She also included suspended tariff proceedings, applications
for new services and contested cases. She agreed that staff
should not just be based on the number of cases and observed
that efficiency should be reviewed. She pointed out that the
Commission has a good record on tariff filings and consumer
complaints. Contested cases vary and are harder to "peg".
Representative Croft asked if there is any consideration of
the failure of the dominant carrier in discussions on
protecting consumers. Ms. Thompson responded that there is
nothing in the law to cover bankruptcy. She noted that there
is a mandate to provide just and reasonable rates and
observed that a number of large utilities in other states
have faced bankruptcy. The AT&T parent company has been
reorganizing and has had serious financial trouble.
In response to a question by Representative Croft, Ms.
Thompson referred to claims that the Regulatory Commission
of Alaska was the cause of ACS's financial lost. She
reviewed their federal regulatory filing and concluded that
their records were not consistent with the implied financial
woes. Their filing reflected increases in local revenues and
a healthy margin, which was not consistent with the notion
that they are going out of business.
In response to a question by Co-Chair Williams, Ms. Thompson
emphasized that, while discussions on open dockets cannot
occur, she is available to talk about process and policy
questions such as why it is taking so long to review a case.
She noted that a particular docket may not be a high
priority of the Commission unless there is communication.
She cannot talk about issues of an open case.
Ms. Thompson discussed universal federal funding, which
supports telephone services in high cost issues. The issue
is portability. The theory is that rural customers are high
cost to serve. If a competitor goes into the area to serve
the high cost customer they are entitled to support. If they
are renting their competitor's facility the amount of
support they can receive is capped by what they pay the
competitor, yet the competitor uses more than just what they
are purchasing to offer service to customers. They have to
have customer service and a switch.
In response to a question by Co-Chair Williams, Ms. Thompson
explained that the legislature decided in 1999 to strengthen
the chair. One of the criticisms of the APUC was that they
were so enmeshed in administrative issues that they were not
doing their work. The chair cannot be reappointed after 4
years. There is no difference between the chair and the
other commissioners in decision-making. The chair is
responsible for administration.
In response to a question by Representative Whitaker, Ms.
Thompson noted that federal policy applies just and
reasonable rates to all utilities. Federal law talks
specifically about the methodology for interconnection
pricing, which is a matter of sovereignty. Federal law
preempts state just and reasonable standards. She observed
that states cannot make their markets any less competitive
than the Telecommunication Act requires. States can make
markets more competitive.
Representative Whitaker questioned if the Regulatory
Commission of Alaska has flexibility to deal with the issue
of specific rate setting methodology. Ms. Thompson noted
that they must meet the standard of forward-looking pricing,
but the Commission has some flexibility in designing the
formula as long as the result is forward looking.
Representative Lancaster noted that there was discussion
before the Senate Judiciary Committee regarding the public
advocacy portion. Ms. Thompson explained that the public
advocacy section was created in 1999 in response to a
suggestion by the legislative auditor. The public advocacy
section has proposed regulations that should address many of
the issues regarding the role they play. She noted that the
Regulatory Commission of Alaska cannot discuss cases with
the public advocacy section in any greater detail than other
parties.
Co-Chair Mulder noted that he would not offer an amendment
relating to interexchange carriers.
Representative John Davies MOVED to ADOPT Amendment 1:
Page 1, line 5:
Delete "Commission chair to establish" Insert
"establishment or'
Page 4, lines 7 - 8:
Delete "chair of the Regulatory Commission of Alaska
shall appoint"
Insert "president of the senate, speaker of the house
of representatives, and the governor shall jointly
appoint the members of'
Page 4, line 12:
Delete "chair"
Insert "persons jointly making the appointments"
Vice-Chair Bunde MOVED to AMEND Amendment 1 by adding
"limited to" on page 4, line 9 after "reform": reforms
limited to the Commission's regulatory process. He observed
that limiting discussions to the regulatory process rather
than any philosophy or decisions would draw a fence.
Representative Croft stressed that there are significant
general public policy questions that could be addressed by a
balanced Commission.
Co-Chair Mulder acknowledged his remarks but pointed out
that a study has already been funded to provide the same
overview. Representative Croft thought that the study was
not directed to consider the kinds of policy decisions being
discussed.
Representative Whitaker clarified that the Commission would
be given specific policy review credentials in regards to
economic models and formulations. Representative Croft
suggested that the [advisory] committee could tell the
agency how it could operate more efficiently and indicate
the affects that their decisions are having on the industry
and the consumer, which would be interesting both to the
legislature and the Commission. Representative Whitaker
expressed concern with the specific policy oversight
function and felt that they would be second-guessing the
Commission.
Representative John Davies questioned the intent of the
amendment [to the amendment]. He questioned if the policy
embedded in the process would be considered. Co-Chair Mulder
interpreted the amendment to the amendment to limit
discussions to procedures. Representative John Davies stated
that he would oppose the amendment to the amendment if it
would limit any discussions on the overall policy. He
pointed out that the committee would only make
recommendations, and felt that it would be a mistake to
limit their review. He noted that it is difficult to
separate the facts of a separate case. He observed that the
committee could recommend a change of policy.
Vice-Chair Bunde noted that there is very little policy that
the group could talk about without retrying the case. He
felt that expansion by the advisory group into policy would
result in a second utilities commission. He did not want to
end up with dueling regulatory commissions and cautioned
against micromanagement. He pointed out that much of the
discussion before the committee focused on process and
emphasized that there could be dueling opinions regarding
policy.
In response to a question by Representative Hudson, Co-Chair
Mulder clarified that the $300 thousand dollar study funded
in the budget would look at policy issues relating to
telephones. The Regulatory Commission of Alaska would fund
the advisory committee. The advisory committee would also
sunset at the time the Regulatory Commission of Alaska would
sunset. It could be continued.
Representative Davies WITHDREW his OBJECTION. There being NO
OBJECTION, the amendment to the amendment was adopted. There
being NO OBJECTION, Amendment 1 as amended was adopted.
Co-Chair Mulder noted that he would work with the Commission
and Representative Croft to address open dockets that
proceeded the new timetables.
Representative Hudson MOVED to report CSHB 3001 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 3001 was REPORTED out of Committee with a "do pass"
recommendation and with a fiscal impact note by the
Department of Community and Economic Development.
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