Legislature(1995 - 1996)

01/30/1995 03:03 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
 HL&C - 01/30/95                                                               
 Number 015                                                                    
 HB 99 - APUC EXTENSION AND REGULATORY COST CHARGE                           
 CHAIRMAN KOTT stated that HB 99 is a committee bill and read the              
 following sponsor statement for HB 99:                                        
 "The Alaska Public Utilities Commission (APUC) is charged with the            
 task of regulating public utilities and pipeline carriers in the              
 State of Alaska.  It does so with the goal of promoting the public            
 interest by enhancing the reliable delivery of affordable utility             
 services.  It also does so with the objective of achieving minimal            
 impact on the economic coffers of the state by passing on its costs           
 to the utilities it regulates.                                                
 "The APUC is in its sunset year, and unless the legislature extends           
 its existence, there soon will be no state entity regulating                  
 utilities.  Because of the unique nature of utility service, this             
 would result in anarchy, conflict among providers, and the                    
 possibility of interruptions in utility services.  This would not             
 be wise and would ill serve the public.  HB 99 acts to avoid this             
 danger in two important respects.                                             
 "First, it extends the APUC for an additional four years, until               
 June 30, 1999.  This ensures that a public body, responsible to               
 Alaska's citizens, will continue to regulate and control the                  
 delivery of vital utility services.                                           
 "Second, HB 99 enacts regulatory cost charges for both traditional            
 utilities and pipeline carriers.  The mechanism that is employed is           
 tailored to adjust the charges so as to reflect the amounts                   
 appropriated by the legislature.  Said charges are collected by the           
 Department of Revenue and go into the General Fund.  Utilities may,           
 but need not, pass the charges along to their customers.  In the              
 event that regulatory cost charges lapse into the general fund at             
 the end of the fiscal year, the amount of said lapsed funds is                
 determined by the Department of Administration.  Thereafter, the              
 Legislature may, but need not, appropriate the amount of lapsed               
 funds into the next fiscal year budget.  When that occurs, the APUC           
 must adjust downward regulatory cost charges by an equal amount.              
 "HB 99, by extending the APUC and concomitantly providing for a               
 funding mechanism, acts to ensure the delivery of uninterrupted,              
 affordable utility services to Alaska's people and businesses.                
 Your support is appreciated."                                                 
 Number 089                                                                    
 JIMMY JACKSON, testifying via teleconference from Anchorage, stated           
 that he is an attorney from General Communications Corporation                
 (GCI).  He testified that GCI believes it is very important to                
 extend the APUC and to pass the legislation authorizing the                   
 extension of the APUC and the regulatory cost charge as soon as               
 possible.  He urges this committee and others to pass it through              
 quickly.  He hopes that the other issues that arose last year and             
 any others that arise now can be handled in a bill separate from              
 the extension.  He said that the extension is unanimous and should            
 be passed as soon as possible.                                                
 JIM ROWE, testifying via teleconference from Anchorage, stated that           
 he is also very interested in seeing a speedy reauthorization of              
 APUC.  He stated that his organization does agree that the                    
 regulatory cost charges (RCC)  should run concurrent with the time            
 of the Commission.  He stated that they will pursue other ventures            
 after re authorization.                                                       
 Number 151                                                                    
 JIM ARNESEN, representing Commercial Refuse, reiterated that he is            
 also in favor of the APUC.  He stated that he thinks that many                
 utilities need to be regulated, but that the refuse industry needs            
 to be regulated to the same degree. He stated that he will send               
 written testimony.  He said that the refuse industry does not share           
 the characteristics of the natural monopoly because of it's lack of           
 heavy investment required for the high degree of infrastructure as            
 is seen in other utilities.  He concluded that Alaska is one of the           
 few states that still regulates refuse at all.                                
 Number 183                                                                    
 CHAIRMAN KOTT asked for testimony from Juneau.                                
 DAVE HUTCHENS, Executive Director, Alaska Rural Electric                      
 Cooperative Association, came to the table.  He restated the two              
 subjects of the bill and thanked the Committee that the version was           
 the same as the one that failed to make it to the floor last year.            
 He pointed out that this version is different from previous                   
 legislation in that it reallocates the RCC slightly by having the             
 electrics deduct the cost of generating their power from their                
 revenues.  He gives the example that this bases the charge for                
 electrics and telephones on the provision of local services rather            
 than the cost of generating the product.  The second point he                 
 mentions is that his organization, Alaska Rural Electric                      
 Cooperative Association, Inc. (ARECA) supports the extension of               
 APUC because APUC stopped the territorial wars of the 1960s.  He              
 submitted two amendment proposals.  The first amendment has two               
 sections; the first of which amends section 221  by adding a new              
 subsection.  He stated that it would read, "A certificate issued              
 under this section to a public utility providing electric service             
 establishes an exclusive service area for the public utility                  
 providing the service."  He stated that the corrected version is              
 the one that he is discussing.                                                
 Number 283                                                                    
 CHAIRMAN KOTT clarified that he would call this corrected version             
 Amendment 1 and the amendment that has to do with AS 42.05.141 will           
 be called Amendment 2.                                                        
 MR. HUTCHENS stated that the second part of Amendment 1 proposes to           
 amend AS 42.05.990(3) by removing the phrase "presently or formerly           
 served by."  This deletion is also needed to define service areas.            
 He explained that because of the history of this phrase it is now             
 misleading.  In the past, this phrase was needed to refer to a                
 person who has never taken services from the existing utility.                
 Today, this same phrase has been interpreted to mean that a new               
 facility going into a service area assigned to an electric utility            
 was exempt from doing their business with that utility.  Therefore,           
 a new provider could come in and prevent the utility from having              
 the growth in that area.  This loophole needs to be eliminated by             
 striking this phrase.                                                         
 MR. HUTCHENS then introduced Amendment 2 that has to do with                  
 eliminating the phrase "and the powers of the commission shall be             
 liberally construed to accomplish its stated purpose."  His                   
 organization felt that this gave too much authority and they have             
 proposed language that limits this power a small amount.  They                
 would like to amend the bill by adding that the Commission may "do            
 all things necessary or proper to carry out the purposes and                  
 exercise the powers expressly granted or reasonably implied in this           
 chapter."  He then stated his key point is that every time the APUC           
 needs to be extended, it should be the business of the legislature            
 and not the courts.  He reaffirmed that this amendment passed the             
 Senate last year and he wants this reinserted again.                          
 CHAIRMAN KOTT clarified that Amendment 2 was part of the bill last            
 REPRESENTATIVE BRIAN PORTER questioned whether these were additions           
 or amendments.                                                                
 MR. HUTCHENS clarified that it would be a new section in the bill,            
 but the section of law would be amended.                                      
 Number 358                                                                    
 VICE CHAIRMAN NORMAN ROKEBERG asked to clarify if the bill includes           
 that any utility that purchases power from a wholesaler gets to               
 deduct that amount form their base and how the RCC is calculated.             
 He asked if an electric utility in this state that does not                   
 generate any power and buys all of its power on a wholesale basis             
 would charge their consumers no RCC?                                          
 MR. HUTCHENS explained that the RCC is based on the retail sales              
 for the power less their cost of power, regardless of whether the             
 utility obtained their's wholesale or generated their own.  He                
 offered the example of the Matanuska Electric Association (MEA)               
 consumers and estimated their reduction at 45 percent.  He states             
 that the cost of furnishing the service is therefore roughly                  
 comparable to other services, like local telephone services as an             
 VICE CHAIRMAN ROKEBERG asked if this bill meant that the MEA                  
 consumers would get a 45 percent reduction in the RCC, and 55                 
 percent would apply to their distribution lines and other expenses.           
 MR. HUTCHENS answered "yes."                                                  
 Number 433                                                                    
 VICE CHAIRMAN ROKEBERG asked if the effect of the amendment  meant            
 a shift away from electric utility consumers to other consumers of            
 other types of utilities?  He asked why the money would be                    
 MR. HUTCHENS explained that the work load for electrics was 34                
 percent during a three year study period, and they were paying for            
 39 percent of the cost through RCC.  Last year's data showed that             
 a 13 percent differentiation rather than a 5 percent.                         
 Number 468                                                                    
 CHAIRMAN KOTT asked Mr. Hutchens if he meant that his organization            
 was paying for services that were supposed to be forthcoming but              
 were never received because they weren't needed.                              
 MR. HUTCHENS explained that the view from his membership was that             
 they were thankful that they were not getting all of the regulation           
 that they were paying for.                                                    
 REPRESENTATIVE PORTER asked if a double charge exists now and this            
 bill would eliminate that.                                                    
 MR. HUTCHENS said no that this would eliminate the cost of the                
 product itself out of the RCC, so that what is left is the RCC                
 being based on the provision of local service.                                
 VICE CHAIRMAN ROKEBERG asked if Mr. Hutchens was suggesting that              
 his constituents would have an increase in their electric bill,               
 while people from another area would have a decrease because the              
 RCC is shifting?                                                              
 MR. HUTCHENS answered, "no."  He clarified that all of the                    
 electrics in the state would be treated similarly, and there would            
 be a shift away from electric to other kinds of utilities.                    
 VICE CHAIRMAN ROKEBERG restated his question, asking if certain               
 utilities, more commonly found in an urban areas will experience a            
 net increase in this reallocation of the RCC, whereas more rural              
 areas will have a decrease?                                                   
 MR. HUTCHENS continued by saying that Vice Chairman Rokeberg's                
 constituents in Anchorage would pay close to the same thing after             
 this legislation, but they would pay more to other utility bills              
 and less to electric.                                                         
 Number 500                                                                    
 REPRESENTATIVE KIM ELTON asked if subsection E would give the                 
 commission the ability to reallocate costs with money                         
 reappropriated back to APUC?                                                  
 MR. HUTCHENS said that he could not answer that because he does not           
 understand "E" to read that way, but that "E" would be a credit to            
 the utilities in proportion to the RCC that they paid.                        
 REPRESENTATIVE ELTON clarified that Mr. Hutchens reads "E" as                 
 saying that reallocation is not based on cost but on the amount               
 paid in by the utility.                                                       
 Number 522                                                                    
 DON SCHRAER, Chairman, APUC, then testified and introduced Bob Lohr           
 who could answer technical questions.  Mr. Schraer suggested that             
 the APUC have a ten year extension rather than a four year                    
 extension.  He stated that the time crunch that is caused by the              
 present extension may cause him to have to refuse business in the             
 future.  He then asked if the amendments suggested by Mr. Hutchens            
 could be added onto another bill to expedite passing their                    
 extension.  He said that there is already a second bill in the                
 Senate regarding the exclusive service area.  He said that he did             
 not understand why the reallocation was necessary because it makes            
 no difference to the consumer whether he pays the amount to one               
 utility or the other.  Mr. Schraer said that he did not have a                
 position on the amendment concerning exclusive service area because           
 he had not reviewed that yet.                                                 
 Number 562                                                                    
 REPRESENTATIVE GENE KUBINA asked why APUC is a $5 million                     
 MR. SCHRAER corrected that they have a $3.7 million budget and that           
 over $3 million of that is personnel and contract costs.  He said             
 the payroll is $2 million and contracts are $900,000, and then                
 office expenses are added to that.  He said that they are getting             
 more efficient and that inflation is largely responsible for the              
 large cost.                                                                   
 REPRESENTATIVE KUBINA said that with everybody else cutting back,             
 it bothers him that in five years APUC expects to increase their              
 budget $1.3 million, and this would come out of the peoples'                  
 Number 582                                                                    
 BOB LOHR, Executive Director, APUC, answered this question that the           
 increase is based on a two percent population growth and an                   
 inflation factor of between three and four percent.  The increase             
 in staff is to meet the needs of increase in population.                      
 REPRESENTATIVE KUBINA asked for a breakdown as to what each utility           
 would pay?                                                                    
 MR. LOHR replied that he did not have that kind of information                
 because that kind of itemization has not been required to date.  He           
 stated that this has been recommended, but it would have a                    
 substantial fiscal impact to produce this itemization.                        
 CHAIRMAN KOTT asked if Mr. Lohr had any firm estimate as to when              
 the APUC would have to shut its doors?                                        
 MR. SCHRAER replied that the actual deadline date is June 13, 1995,           
 but he would estimate that after April 1, the crunch would come.              
 MR. LOHR supplemented his answer stating that this would be the               
 impact relating to APUC's ability to process new filings.  He then            
 asked if opening a new regulatory proceeding makes sense given that           
 the new regulations could not possibly take effect before June 13,            
 unless they were emergency regulations.  He said that there is a              
 clear impact on staff retention.  He said as a result of the                  
 sunset, they have already lost employees who could find more stable           
 work elsewhere.  They have also had difficulty recruiting for their           
 key positions because they can only assure work for up to three               
 months.  He said therefore, they are having difficulty obtaining              
 the right people for the job.                                                 
 Number 643                                                                    
 CHAIRMAN KOTT then asked how APUC was able to operate this year               
 with an expired ability to collect their regulatory charges?                  
 MR. SCHRAER replied that they collected the full annual charge in             
 December, for the full fiscal year.                                           
 TAPE 95-2, SIDE B                                                             
 Number 000                                                                    
 MR. LOHR explained that it was creative financing that allowed them           
 to operate.                                                                   
 Number 056                                                                    
 VICE CHAIRMAN ROKEBERG questioned the dollar impact on the                    
 MR. LOHR answered that the reallocation was immaterial, because the           
 RCC, itself, is nearly immaterial.  He estimated that it is in the            
 range of $10 a year.                                                          
 VICE CHAIRMAN ROKEBERG asked about the accuracy of the workload for           
 collecting utilities.                                                         
 MR. LOHR said that this estimate is definitely accurate, that he              
 personally determined it.  He said that essentially it is hard to             
 argue that anyone is significantly overpaying for the amount of               
 regulatory services they are receiving.                                       
 Number 089                                                                    
 CHAIRMAN KOTT agreed with Mr. Schraer about the need for a longer             
 period of extension, but stated that very few boards and                      
 commissions have more than a four year extension.                             
 MR. SCHRAER restated that APUC has been meeting its public purpose            
 and that no one is testifying that they should be sunsetted.                  
 CHAIRMAN KOTT closed public testimony and opened the debate of the            
 Number 147                                                                    
 REPRESENTATIVE JERRY SANDERS moved Amendment 1, as proposed by the            
 VICE CHAIRMAN ROKEBERG objected and asked for the purpose of                  
 REPRESENTATIVE SANDERS clarified that this is the amendment for               
 "exclusive service areas."  He stated that he believes now is the             
 time to add this amendment, because the chances of this being done            
 after the APUC extension are very slim.                                       
 VICE CHAIRMAN ROKEBERG said that he would like more time to look              
 over these amendments, and he did not want to hold up the APUC                
 extension.  Therefore, he did not support either of the amendments.           
 REPRESENTATIVE PORTER expressed his concern that Amendment 1 is new           
 this year, and he would like this amendment and Amendment 2 to be             
 handled with the Senate bill.                                                 
 REPRESENTATIVE ELTON agreed that he did not think the committee               
 should hold up the extension and that the amendments should be                
 addressed with the Senate bill.                                               
 REPRESENTATIVE KUBINA asked the intent of the Chair in reference to           
 moving this bill.                                                             
 Number 232                                                                    
 CHAIRMAN KOTT expressed his intent to move the bill out of                    
 committee today.                                                              
 REPRESENTATIVE KUBINA stated that he supports both amendments.                
 Number 261                                                                    
 CHAIRMAN KOTT stated that Amendment 1 was moved and asked for a               
 roll call vote.  Voting for the Amendment was Representative                  
 Sanders, and Kubina.  Voting in opposition were Representatives               
 Kott, Rokeberg, Masek, Porter, and Elton.                                     
 CHAIRMAN KOTT stated that Amendment 1 failed.                                 
 Number 262                                                                    
 REPRESENTATIVE SANDERS moved Amendment 2.                                     
 VICE CHAIRMAN ROKEBERG objected.                                              
 REPRESENTATIVE SANDERS stated that he thinks this amendment should            
 be passed because now is the time to tighten the language of this             
 VICE CHAIRMAN ROKEBERG again expressed his concern that he did not            
 have time to review this amendment and that he did not want to hold           
 up the extension.                                                             
 REPRESENTATIVE SANDERS apologized that this amendment was offered             
 late, and proceeded to say that he thinks it needs to be done now             
 or it will not be done at all.                                                
 CHAIRMAN KOTT explained that this amendment is fairly innocuous and           
 called Mr. Schraer back to the table to address this amendment.               
 MR. SCHRAER restated that his intention was to keep the extension             
 free from any business that might hold up the extension.  He said             
 that this issue is addressed in the Senate bill.  He stated that              
 when this issue was brought to trial, the courts ruled in favor of            
 the APUC in the majority of the cases.  He explained that the                 
 phrase "liberally construed" has in the past allowed them to                  
 conduct necessary business, and he considers that the language is             
 a matter for the attorneys.                                                   
 CHAIRMAN KOTT asked if the proposed substitute phrase "necessary or           
 proper" would not allow them to conduct the same business.                    
 Number 330                                                                    
 MR. SCHRAER answered that he personally thinks that it would, but             
 that he thinks it is necessary to ask an attorney.                            
 CHAIRMAN KOTT asked for a roll call vote to change this language by           
 adopting Amendment 2.  Voting for the amendment were                          
 Representatives Kubina, Sanders, and Kott.  Representatives                   
 Rokeberg, Masek, Porter, and Elton voted against the amendment.               
 Number 353                                                                    
 CHAIRMAN KOTT affirmed that the amendment failed.                             
 VICE CHAIRMAN ROKEBERG moved on page two, Section 1 (c), delete (3)           
 which is a reallocation away from electric utility users to other             
 utility users in the state.                                                   
 CHAIRMAN KOTT offered this as amendment number three that deletes             
 lines nine through eleven on page two.                                        
 REPRESENTATIVE KUBINA notes that line seven reads that the APUC is            
 charging .8 percent.  He stated that he believes this is an                   
 increase, and that removing lines nine through eleven means that              
 more money would be collected than what the fiscal note says.                 
 MR. SCHRAER said, "No, the APUC would not collect more money                  
 because their budget is still set by the legislature."  He called             
 Mr. Lohr to explain the technical difference between .61 percent              
 and .8 percent.                                                               
 MR. LOHR affirmed that Representative Kubina was correct.  He                 
 continued the purpose in the increase of the cap from .61 percent             
 to .8 percent was precisely because of the cost of power exclusion.           
 He suggested that to be consistent, both lines my be changed to 6.1           
 MR. LOHR said that the APUC does not oppose the changes made in               
 this bill and he elaborated that the change is very minuscule in              
 the charge to any one family.                                                 
 VICE CHAIRMAN ROKEBERG said that this is exactly his point.  He               
 stated that he does not understand the need for a change when it is           
 already changed in the statute.                                               
 MR. LOHR again stated that his point is to accept what is in the              
 bill with no amendments, in order to expedite the extension.                  
 REPRESENTATIVE ELTON reminded that the intent is to pass a clean              
 VICE CHAIRMAN ROKEBERG stated that the way this bill is presented             
 is a change and that by approving the bill the committee would be             
 changing the law as it currently stands.  He stated that he wants             
 to go back to the status quo.                                                 
 Number 438                                                                    
 MR. LOHR  suggested that Vice Chairman's statement depends on the             
 baseline.  He states that they are really starting from scratch               
 because the other act was automatically repealed December 31.  He             
 stated that it would be a change from the two year period during              
 which the RCC operated.                                                       
 VICE CHAIRMAN ROKEBERG  then amended his amendment to include the             
 change to .61 percent.                                                        
 CHAIRMAN KOTT stated that Amendment 3 has been amended to change              
 page 1, line 7 from  .8 percent to 6.1 percent.  He then objected             
 to the amendment as he stated that the amendment to the amendment             
 affects the regulatory charges in Section 3, page 4, line 2.                  
 MR. SCHRAER confirmed that this line too must be changed to be                
 Number 478                                                                    
 CHAIRMAN KOTT asked for clarification if the change from .8 percent           
 to .61 percent needed to be done in only Section 1 or does it need            
 to include the pipeline carrier regulatory cost charges as well?              
 MR. SCHRAER stated that the change would need to be made in both              
 REPRESENTATIVE PORTER recommended that neither change be made                 
 because it appears that it is not simple to return to the way                 
 things were because of other verbages, that now exist in the bill,            
 that are inconsistent with what the rates were before the change.             
 He says that attempting to quickly alter the bill now may change              
 the original intent, and that it is safer to pass the bill as it              
 was written.                                                                  
 VICE CHAIRMAN ROKEBERG agreed and offered to withdraw his amendment           
 if he could make another amendment to delete the words "and                   
 purchased power reported to the commission," in Section 1 (c) (3)             
 lines 10 and 11.                                                              
 CHAIRMAN KOTT clarified that Vice Chairman Rokeberg had withdrawn             
 Amendment 3 and submitted Amendment 4 which in essence deletes                
 these words on page 2.                                                        
 REPRESENTATIVE ELTON objected and offered that these suggestions be           
 addressed in the Senate bill.                                                 
 CHAIRMAN KOTT agreed with Representative Porter that the bill                 
 should not be altered in bits and pieces at this point.                       
 REPRESENTATIVE KUBINA stated that Amendment 4 would penalize one              
 segment over another.                                                         
 CHAIRMAN KOTT asked for a roll call vote.  Representative Rokeberg            
 voted for Amendment number four.  Representatives Kott, Sanders,              
 Masek, Porter, Elton, and Kubina voted against the amendment.                 
 Thus, Amendment 4 failed.                                                     
 REPRESENTATIVE PORTER moved that HB 99 be moved from the committee.           
 Hearing no objection, CHAIRMAN KOTT stated that the HB 99 was                 
 unanimously moved from the committee.                                         

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