05/01/2003 03:14 PM House FIN

HOUSE BILL NO. 119                                                                                                            
                                                                                                                                
     "An Act permitting grants to certain regulated public                                                                      
     utilities for water quality enhancement projects and                                                                       
     water supply and wastewater systems."                                                                                      
                                                                                                                                
REPRESENTATIVE JOHN COGHILL, SPONSOR  spoke in support of the                                                                   
legislation.  The  legislation  would  permit  grants  to  be                                                                   
offered to  utilities that serve  the pubic (municipally  and                                                                   
privately  owned).   The  intent  is to  encourage  municipal                                                                   
development.   Section 3 would  allow public water  and sewer                                                                   
utilities to be  eligible for projects that  are regulated by                                                                   
Regulatory   Commission  of  Alaska.   The  question   arises                                                                   
regarding whether those doing  contract work or own a utility                                                                   
would be able  to a make profit  from the grants.   He stated                                                                   
that  they  would not.    He  referenced  a letter  from  the                                                                   
Department  of  Community  and  Economic  Development,  dated                                                                   
April  8, 2002, in  member's packets.   Grants  would be  for                                                                   
project expansion  and would not  be put into the  asset base                                                                   
that  would be  later  sold.   The  purchase  price that  the                                                                   
utility  would be  able  to recover  would  be regulated.  He                                                                   
stressed  that the legislation  seeks  equity. The intent  is                                                                   
not   to  allow   public   money   to  bolster   up   private                                                                   
corporations,  but  to give  ratepayers  relief  and to  grow                                                                   
Alaska through an expansion of utilities.                                                                                       
                                                                                                                                
Representative Coghill observed  that the contributed capital                                                                   
for the  utilities would be  regulated.  Regulated  utilities                                                                   
would not  be permitted to  recover contributed  capital from                                                                   
its costumers.  It would account for the  contributed capital                                                                   
in a manner that is identified  and outlined in the rate base                                                                   
under  the  uniform  system of  accounts  in  the  Regulatory                                                                   
Commission  of Alaska.   The bill  contains many  safeguards.                                                                   
He  claimed  that  he was  comfortable  with  the  issue  and                                                                   
requested approval and passage of the legislation.                                                                              
                                                                                                                                
Co-Chair  Harris  asked  how many  private  water  and  sewer                                                                   
utilities  were  in  the state  of  Alaska.    Representative                                                                   
Coghill  stated  that there  were  four  sewer and  21  water                                                                   
related utilities.   He noted that in Fairbanks,  one company                                                                   
operates two different utilities.                                                                                               
                                                                                                                                
DAN  GAVORA, EXECUTIVE  VICE PRESIDENT,  UTILITY SERVICES  OF                                                                   
ALASKA testified  via teleconference in support  of the bill.                                                                   
He stated that as a result of  the privatization process that                                                                   
Fairbanks ratepayers  had lost  this eligibility.  The source                                                                   
of the funds that  pay for the grants are collected  from the                                                                   
taxes paid  by both  municipal and  private owned  utilities.                                                                   
He maintained  that to discriminate against  utilities, which                                                                   
shared equally  in the burden,  was unjust and that  the bill                                                                   
would put Fairbanks ratepayers  on an equal level with others                                                                   
in  the  state.    He  noted  that  there  were  45  thousand                                                                   
residents in the state that are  not given the same treatment                                                                   
as  the  remainder  of  the  state.    He  noted  that  under                                                                   
Regulatory  Commission  of Alaska  regulations  all  economic                                                                   
benefits  of the  grants  are passed  on  to the  ratepayers.                                                                   
Shareholders  receive no benefit.   He  stated that  the bill                                                                   
would  reduce  the  burden  to   ratepayers,  and  to  expand                                                                   
service.                                                                                                                        
                                                                                                                                
Representative   Stoltze   requested  that   the   Regulatory                                                                   
Commission of Alaska testify at a future meeting.                                                                               
                                                                                                                                
HB  119  was   heard  and  HELD  in  Committee   for  further                                                                   
consideration.