Legislature(2003 - 2004)
04/23/2004 08:42 AM 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. 453
An Act exempting from regulation under the Alaska
Public Utilities Regulatory Act wholesale agreements
for the sale of power by joint action agencies and
contracts related to those agreements, and joint action
agencies composed of public utilities of political
subdivisions and utilities organized under the Electric
and Telephone Cooperative Act.
Co-Chair Williams noted that testimony on HB 453 had been
taken previously and that it was his intention to hear and
hold the bill today.
Co-Chair Williams asked Mr. Eckert if he had been asked to
be part of the joint action agencies (JAA) program.
RICK ECKERT, HOMER ELECTRIC ASSOCIATION, replied that he
believed a JAA is being negotiated between Chugach Golden
Valley Electric Association (CGVEA) and Anchorage Municipal
Light & Power, and the group did not extend a formal
invitation to Homer Electric Association (HEA) to become a
member.
Co-Chair Williams asked Mr. Eckert to present his views on
the bill.
Mr. Eckert stated that the HEA is opposed to HB 453. Its
primary concern is the governance of the cost of wholesale
power for its members. The HEA currently purchases its power
from the CGVEA through its generation and transmission
subsidiary, Alaska Electric & Energy Cooperative. The
contract with Chugach will expire in 2013.
Mr. Eckert explained that in a recent case before the
Regulatory Commission of Alaska, CGVEA asked for a
ratemaking method that had not been used by electric
cooperatives involved in the proceeding. The CGVEA also
requested a substantial increase in the profit margin that
HEA would pay to CGVEA, above the cost of operations and
maintenance of the facilities. The request applied to NEA
in Seward as well. The HEA, Mat-Su Electric Association
(MEA) and Seward opposed this request and the Commission
ruled in their favor following the precedent established in
late 1980s.
Mr. Eckert stated that CGVEA informed its members that the
rest of its members now subsidize HEA, NEA and Seward, and
HEA became concerned over the use of the undefined
possibilities in HB 453. The Railbelt energy needs are best
provided by a joint effort. The Railbelt is a relatively
small market. New projects providing power are easily
identified and limited in number.
Mr. Eckert expressed concern that if the bill passed, the
largest utilities would have the ability to control the best
projects without Regulatory Commission of Alaska oversight.
The HEA does not have to join a JAA if the participation is
not satisfactory, and it would look for power from that JAA
at a negotiated price. If a JAA is not regulated, a JAA
member that HEA purchases power from will charge based on
what the JAA charges it. The Regulatory Commission of Alaska
will have ability to review the wholesale agreement between
the JAA member and the HEA, but would have no ability to
review or regulate the agreement between the JAA and its
member. Mr. Eckert noted that the HEA could create its own
sources of power and it is driven by the incentive to
produce the lowest cost for its members rather than profits
for stockholders. The HEA believes that exemption from
regulation should be requested for a specific project and
its economic participants. Exemption should only happen when
a unified system operation by the utilities is demonstrated.
Representative Stoltze asked if the crux of the bill is
removal of Regulatory Commission of Alaska oversight on
consumer protection due to its decisions in favor of the
consumer. He pointed out that the HEA is a consumer.
Mr. Eckert said that HB 453 is a significant result of
Chugach Electric Association's concern over the Regulatory
Commission of Alaska ruling in the rate case he referred to
earlier. He explained that the HEA, Mat-Su Electric
Association, and the City of Seward represent 50,000 to
60,000 consumers of power through wholesale power
agreements. Their rate is cost-plus and there is limited
ability to affect that cost, so the Regulatory Commission of
Alaska has become its only advocate.
Representative Stoltze asked if the bill would remove an
important element of current consumer protection. Mr.
Eckert affirmed that it is the Homer Electric Association's
concern.
Representative Croft asked for clarification of whether the
Regulatory Commission of Alaska would retain jurisdiction to
determine the merits of an initial wholesale power contract
within the JAA at a later date. Mr. Eckert said that if the
bill passed, the Regulatory Commission of Alaska could not
modify the internal agreements of the JAA.
Representative Croft asked if the Regulatory Commission of
Alaska could take another number as the allowable rate base
rather than the agreed contract within the JAA. Mr. Eckert
answered that the Regulatory Commission of Alaska could do
that, and he discussed its review.
Representative Croft asked if the Regulatory Commission of
Alaska would have legal authority but practical difficulties
later on. Mr. Eckert agreed that there would be practical
difficulties.
Vice-Chair Meyer began chairing the meeting and noted that
Co-Chair Williams requested to hold HB 453. He stated that
testimony would be postponed until this afternoon's hearing.
Representative Heinze pointed out that she had worked with
Mr. Eckert and she amended the bill at his request. She had
involved several electrical associations in the effort to
craft a good bill.
Representative Hawker noted a letter in the HB 453 packet in
opposition to the bill that contains his typewritten name
but not his signature. He stressed that he did not endorse
the letter, saying that he had requested the carrier remove
his name prior to being entered into the record. He asked
that the letter be expunged from the record until his name
was removed. Representative Hawker pointed out that he is on
record having made no commitment on the bill.
Mr. Eckert commented that the Homer Electric Association
still opposes the bill after the drafting change
Representative Heinze made reference to.
HB 453 was heard and HELD in Committee for further
consideration.
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