Legislature(2005 - 2006)HOUSE FINANCE 519
04/29/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB217 | |
| HJR6 | |
| HB148 | |
| HB157 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 217 | TELECONFERENCED | |
| += | HCR 6 | TELECONFERENCED | |
| += | HB 148 | TELECONFERENCED | |
| + | HB 157 | TELECONFERENCED | |
| + | SB 147 | TELECONFERENCED | |
| + | SB 139 | TELECONFERENCED | |
| + | SJR 11 | TELECONFERENCED | |
| + | SB 16 | TELECONFERENCED | |
| + | TELECONFERENCED |
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 157
"An Act clarifying the powers of electric or telephone
cooperatives to become members of or own stock in other
entities."
Co-Chair Meyer stated his intent to take public testimony
and hold HB 157 over.
JON BITTNER, STAFF, REPRESENTATIVE TOM ANDERSON, explained
the bill. As it currently exists, the Alaska Electric and
Telephone Cooperative Act grants electric and telephone
cooperatives broad powers to conduct various activities.
Those powers include the ability to become a member of other
cooperatives or corporations or own stock in them. These
powers allow the formation of subsidiary corporations or
cooperatives in which a cooperative can own all or a portion
of another legal entity that conducts activities separate
from the cooperative's utility operations. For example,
some cooperatives provide Internet or cable television
services.
Mr. Bittner related that recent court decisions have called
into question a cooperative's ability to own subsidiary
corporations. There is concern that those cases could be
used in the future to help interpret Alaska's laws. HB 157
proposes to clarify AS 10.25.020 to make clear that a
cooperative utility may own an interest in another entity
organized for any lawful purpose. This amendment preserves
and clarifies the current statute.
Mr. Bittner reported that the second change made in HB 157
is the addition of "limited liability company" to the list
of entities a cooperative may become a member of or own
stock in. He urged support for this legislation.
3:02:09 PM
Representative Croft asked if it would create unfair
competition with private fuel operators. Mr. Bittner
replied that it would not create unfair competition. The
subsidiary corporations fall under the same tax codes and
regulations as private operators.
3:03:48 PM
Representative Kelly discussed cooperatives and how they are
organized related to lowering of fuel costs in the bush. He
testified in support of the bill.
3:05:46 PM
Representative Hawker asked Mr. Bittner to explain the
changes to the Labor and Commerce version of the bill. Mr.
Bittner replied that Subsection 9 was removed.
Representative Hawker asked if that solved a lot of
problems. Mr. Bittner said it did not solve the problems of
the fuel providers, but it did solve those involving the
Department of Revenue. Without the removal of Subsection 9,
coops would have directly been able to sell fuel, which was
never their intention.
3:08:10 PM
Representative Hawker asked if the coops are tax-exempt.
Mr. Bittner said yes. Representative Hawker asked if they
are being allowed to capitalize a limited liability company
as a tax-exempt entity. He suggested directing that
question to Eric Yould of the Alaska Power Association.
3:09:21 PM
FRANK CORBIN, NUSHAGAK COOPERATIVE, DILLINGHAM, encourage
passage of HB 157 because it offers cooperatives a chance to
freely engage in alternative, legal business ventures. He
suggested that competition is good. He gave an example from
Bristol Bay Fuels. He clarified the tax-exempt issue as it
applies to his cooperative.
3:12:30 PM
Representative Holm questioned a statement made by Mr.
Corbin that profit should not restrain the ability to go
forward. He asked where Mr. Corbin's fuel is bought. Mr.
Corbin replied that the cooperative is part of the Western
Alliance Fuel group and the fuel is put out to bid.
Representative Holm restated the question. Mr. Corbin
deferred to Mr. Reeves.
3:13:42 PM
BRAD REEVES, CEO, KOTZEBUE ELECTRIC, related the various
recent increases in fuel price. He stated that last year
the fuel was purchased through Yukon Fuel and this year the
contract will go to Crawley Maritime. He described how the
cooperative was formed in response to the changing economy.
He gave an example of a limited liability corporation that
his company is involved with. He spoke of his community's
needs and how the bill would affect it.
3:19:47 PM
Representative Holm asked where Mr. Reeves would buy his
fuel previous to developing a cooperative. Mr. Reeves
related the history of his cooperative and how the community
saved over $20 million dollars by investing in a tank.
3:20:48 PM
Representative Holm made the point that no fuel is available
to buy in the State of Alaska. Instead it is barged in.
Mr. Reeves replied that they purchase fuel from Nikiski, and
it has been 12 years since they have purchased out of state.
He noted he would be willing to look at purchasing out of
state if the price were lower.
3:21:46 PM
Representative Holm asked if Mr. Reeve's facility is
subsidized. Mr. Reeves replied that they have received
grants from the Department of Energy for the wind project,
and some state and federal dollars. Some were direct
appropriations from Senator Stevens.
3:22:45 PM
VERN RAUSCHER, INSIDE PASSAGE ELECTRIC COOPERATIVE,
commented that the cooperative has an obligation to listen
to requests of the customers. He spoke about fuel business
concerns. The Board has discussed these concerns. He
mentioned utility billing requests. He stated that they
have the authority to diversify into other areas. He spoke
in favor of HB 157.
3:24:55 PM
Representative Holm asked where they buy their fuel. Mr.
Rauscher replied from Petro Marine out of Seattle, and also
from one local wholesaler.
Representative Holm commented that the volume is predicated
by the customers. If a wholesaler had volume removed then
it would adversely influence the customer. Mr. Rauscher
replied that it was not the intent to put anyone out of
business, however, there is room for competition. He gave
an example of paying 40 to 50 cents more than barge prices.
With talk of competitors coming in, wholesale prices dropped
by 25 cents. He stated he would welcome a competitor in any
of his communities.
3:27:29 PM
Representative Holm pointed out, from the capital investment
side, that he would be disturbed by allowing a non-taxable
entity to enter into the market place for profit. He voiced
concern with unintended consequences.
Mr. Rauscher responded that they purchase a minimum of
25,000 gallons to get the first price break. When the
wholesale price drops, he said he believes it is from
competition.
3:29:53 PM
PAT CARTER, LOBBYIST, DELTA WESTERN, addressed competition.
He spoke of a concern about an unlevel playing field with a
heavily subsidized entity. There are certain markets, which
are small and having trouble finding a buyer. Under certain
circumstances, there are not problems going into certain
businesses. He noted that there is an attempt to work out a
compromise. He opined that the legislation is written too
broadly. It should be limited to certain rural communities.
Mr. Carter thought that a government entity needed to be
involved. An LLC does not get to use any of the subsidized
assets of the coop. He stated that it should be limited to
a specific geographical area and be revenue neutral for the
state.
Mr. Carter mentioned the competition within the communities.
Delta Western is sensitive to high costs in rural Alaska,
however Delta Western's margins are not changing due to the
high costs of crude oil. He presented an analogy. He
concluded that the bill will drive the private sector
investor out of business, which will result in no
competition.
3:36:23 PM
Mr. Carter addressed accumulated tax-exempt wealth. The
utilities have a limitation on how much revenue they can
receive; 15% without loosing tax-exempt status. He opined
that the current bill was written too broadly.
Mr. Carter asked for consideration whether it is right to
allow a subsidized entity to drive the private sector out.
Representative Hawker asked that the excise tax section be
present to testify the next time the bill is before the
Committee.
HB 157 was HELD in Committee for further consideration.
| Document Name | Date/Time | Subjects |
|---|