Legislature(1995 - 1996)
02/02/1995 01:35 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL NO. 99 "An Act extending the Alaska Public Utilities Commission; and relating to regulatory cost charges." GEORGE DOZIER, STAFF, REPRESENTATIVE KOTT testified in support of HB 99. He explained that the Alaska Public Utilities Commission (APUC) is in its sunset year and will terminate without legislative action. He emphasized that 1 the APUC has been effected by the its uncertain future. He observed that HB 99 would extend the APUC until June 30, 1999. Regulatory cost charges would be enacted for pipeline carriers and traditional utilities. The regulatory cost charge would be capped at .8 percent of the gross revenues of the utility being regulated. The legislation directs the APUC to make periodic adjustments if collections surpass the amount needed to operate the APUC. Charges would be collected by the Department of Revenue on a quarterly basis. If funds lapse the legislation would have the option to reappropriate the amount to the APUC. He noted that Representative Kott supports the addition of an immediate effective date. Representative Brown asked the reason for the increase from .61 to .8 percent. Mr. Dozier explained that the increase was added in response to the provision which would permit electrical utilities to deduct the cost of power generation or purchase from their gross revenues. He explained that the change was a response to the perception that the APUC was spending a disproportionate amount time and expense on non-electric utilities. In response to a question by Representative Brown, Mr. Dozier indicated that it is difficult to ascertain the amount of time spent by the Commission on each utility served. Co-Chair Hanley disclosed that his mother is a member of the APUC. Representative Foster disclosed that her husband, Mark Foster, is working under contract for Anchorage Telephone Company. ROBERT LOHR, EXECUTIVE DIRECTOR, ALASKA PUBLIC UTILITIES COMMISSION testified in support of HB 99. He reiterated that absent legislation the Commission will terminate June 30, 1995. He stressed that the consequences of the termination of the Commission would be dramatic. He noted that no provisions for the transfer of responsibilities provided under AS 42.05 and AS 42.06 to another entity. He stressed that the statutes are not self executing. Mr. Lohr emphasized that an audit by the Legislative Auditor found that the Commission is meeting its public purpose and recommended an extension of ten years. He reiterated that HB 99 extends the Commission until 1999 and reenacts the regulatory cost charge. He recalled that the regulatory cost charge was repealed effective December 31, 1994. He observed that the FY 95 appropriation to the Commission was $3.6 million dollars. General fund program receipts raised from the regulatory cost charge was identified as the funding source. However, the regulatory cost charge expired 2 half way through the fiscal year. The Commission elected to double the collection of fees from utilities during the first half of the year by amendment of regulations. Fees to utility costumers were kept at the same level. Fees to utility costumers continued since they are pursuant to the Commission's general powers and duties. Mr. Lohr noted that another area of concern was the Commission's legal authority during its wind down year. The Attorney General advised that despite differences in language between Title 8 and 44, that the Commission could continue its legal authority. Mr. Lohr pointed out that the Commissions ability to recruit employees has been inhibited. Mr. Lohr stressed that there has been minimal costumer complaint in regards to the regulatory cost charge. In response to a question by Representative Brown, Mr. Lohr explained that the Commission has not tract allocation of time by utility type. He noted that significant costs would be involved in order to implement tracking mechanisms. He questioned assumptions used by the Legislative Auditor to assess the Commission's workload. The auditor concluded that electric utilities had less activity before the Commission than other utilities, such as telephone utilities. He emphasized that variations exist over time. In response to a question by Representative Brown, Mr. Lohr explained that the new provisions on page 2, line 7 - 11 would not add to the Commission's administration expense. He added that the cost of power exclusion is subject to varied interpretation and could be the subject of contention. Mr. Lohr estimated that the reduction in regulatory cost charge payments by electric utilities would be approximately 45 percent. He observed that costs would be shifted to all other regulated utilities. The change would reflect the perception that electric are over paying for the amount of regulatory services that they currently receive. Mr. Lohr did not believe that the electric utilities are over paying. In response to a question by Co-Chair Foster, Mr. Lohr explained that the rates do not vary by area. Representative Kelly questioned if other utilities will make the case that new criteria should be used to adjust their rates. Mr. Lohr agreed that the Commission is concerned that if rates are itemized for one utility, or measure regulatory services against payment, that it would be appropriate for all regulated utilities. He noted that 3 previous debate proposed that pipelines be itemized separately from utilities. The Senate rejected the separation of pipelines from utilities. The Commission was directed to consolidate pipelines and utilities and limit its collection to the total amount needed to match its operating budget. In response to a question by Representative Kohring, Mr. Lohr reiterated that the Commission doubled its first year charge. Representative Kohring questioned if urban areas containing competitors should be allowed to regulate themselves, in terms of maintaining competitive rates. Mr. Lohr emphasized that competition would not necessarily breakdown on a rural urban bases. He noted that competition is viable in long distance calling. He emphasized that where competition is viable there is less need for regulation. He recognized that where there is a dominate carrier involved with a significant market share that there may be some necessarily of regulation. He stressed that industry competition is preferred to Commission regulation. He acknowledged that Commission regulation is to be a proxy, or substitute for competition. Representative Therriault questioned the substitution of "may" for "shall" on page 3, line 16. Mr. Lohr explained that the language would restore the status quo of the last two years. He noted that the language would allow an intervener to be apportioned their fair share cost by the Commission. Representative Therriault provided members with Amendment 1, 9-LS0454\C.4 by Representative Kott (Attachment 1). He explained that the amendment would add an immediate effective date. Representative Therriault MOVED to adopt Amendment 1. There being NO OBJECTION, it was so ordered. Representative Brown MOVED to delete (3), page 2, lines 9 - 11. Representative Mulder OBJECTED. Mr. Lohr noted that the ceiling was raised from .61 to .81 in response to the inclusion of (3) to accommodate the shift in funding. Representative Brown noted that ".81" should be deleted and ".61" added on page 1, line 2 and page 4, line 2. Mr. Lohr noted that the amendment to the amendment would reduce the cap to the amount the Commission previously operated under. He observed that the Commission has found the amount sufficient. Representative MOVED to AMEND her amendment to delete ".81" and add ".61" on page 1, line 2 and page 4, line 2. 4 In response to a question by Representative Therriault, Mr. Lohr identified the direction to identify the amount of carryover balance and authorizes the legislature to appropriate the balance back to the Commission and reduce the subsequent year rate as the only changes from the status quo. Representative Mulder WITHDREW his OBJECTION. There being NO OBJECTION, (3), page 2, lines 9 - 11 was deleted and ".81" was deleted and ".61" added on page 1, line 2 and page 4, line 2. Representative Navarre clarified that page 2, line 5 applies to power sold among utilities. Mr. Lohr stated that the language protects the double charging the same dollar of gross revenue. Power sold to a commercial or industrial customer is gross revenue subject to the regulatory cost charge. Representative Kohring MOVED to report CSHB 99 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTION, it was so ordered. CSHB 99 (FIN) was reported out of Committee with a "do pass" recommendation and with two zero fiscal notes by the Department of Administration and the Department of Revenue, dated 2/1/95; and with a fiscal impact note by the Department of Commerce and Economic Development, dated 2/1/95.