Legislature(1995 - 1996)
01/30/1995 03:03 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 year. 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 example. 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 reallocated? 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 commission? 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' pockets. 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 consumer? 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 committee. Number 147 REPRESENTATIVE JERRY SANDERS moved Amendment 1, as proposed by the ARECA. VICE CHAIRMAN ROKEBERG objected and asked for the purpose of discussion. 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 bill. 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 percent. 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 bill. 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 consistent. 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 areas. 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.