Legislature(2003 - 2004)

03/19/2003 03:16 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB 119-WATER/SEWER/WASTE GRANTS TO UTILITIES                                                                                  
                                                                                                                                
Number 502                                                                                                                      
                                                                                                                                
CHAIR ANDERSON  announced that  the next  order of business  would                                                              
be  HOUSE BILL  NO.  119, "An  Act  permitting  grants to  certain                                                              
regulated   public  utilities   for   water  quality   enhancement                                                              
projects and water supply and wastewater systems."                                                                              
                                                                                                                                
Number 0538                                                                                                                     
                                                                                                                                
REPRESENTATIVE  JACK COGHILL,  Alaska  State Legislature,  sponsor                                                              
of HB 119, noted that Section 3 is the heart of the bill.                                                                       
                                                                                                                                
Number 0528                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  moved  to adopt  committee  substitute                                                              
(CS)  HB  119,  Version  23-LS0617\D,   Craver,  3/12/03,  as  the                                                              
working  document.    There  being no  objection,  Version  D  was                                                              
before the committee.                                                                                                           
                                                                                                                                
REPRESENTATIVE COGHILL  testified that this legislation  will give                                                              
certain groups that  provide water and sewer services  the ability                                                              
to  access  matching  grants,  regardless   of  whether  they  are                                                              
publicly or  privately owned.   However, these  groups do  need to                                                              
fall  under  the  jurisdiction of  the  Regulatory  Commission  of                                                              
Alaska (RCA).   He said this provision  is found on page  2, lines                                                              
15-18, in Section  3, which reads:  "(i) A public  water and sewer                                                              
utility is eligible  for a grant for projects  described in (b)(1)                                                              
-  (3)  of  this  section  if  its  rates  are  regulated  by  the                                                              
Regulatory Commission of Alaska under AS 42.05."                                                                                
                                                                                                                                
REPRESENTATIVE COGHILL  explained that HB 119 attempts  to provide                                                              
equity.   A privately  owned utility  in Fairbanks was  originally                                                              
publicly  owned;  when the  company  made  the transition,  it  no                                                              
longer  qualified  for  state  matching  grants.   He  noted  that                                                              
private utilities  serve  the same customers  as public  utilities                                                              
and  have  the same  needs.    A  key question  is  whether  [such                                                              
financial  assistance]  increases   the  profit  for  the  private                                                              
utility or  whether it helps  the ratepayers.   He said  this bill                                                              
allows the  utility to  expand or  do maintenance without  passing                                                              
the cost  onto the  customers.  For  example, a municipal  utility                                                              
can use  grant money  to expand,  and the  ratepayers receive  the                                                              
benefit   [of  the   expansion   without   a  corresponding   rate                                                              
increase].   He said  under HB  119, the  grant would  not enlarge                                                              
the  asset base  of the  for-profit utility.   The  RCA would  not                                                              
calculate the  grant in  adjusting the company's  rate.   He added                                                              
that  there may  other  smaller [privately-owned]  companies  that                                                              
provide  similar   services,  for  example,  village   safe  water                                                              
contracts.                                                                                                                      
                                                                                                                                
Number 0811                                                                                                                     
                                                                                                                                
DAVID LEONE,  Special Assistant,  Mayor's Office, Fairbanks  North                                                              
Star  Borough,  testified  that   this  second-class  borough  has                                                              
limited  powers  to  provide  water   and  wastewater  facilities.                                                              
These utilities  can be provided through citizen-approved  service                                                              
areas, of which  there are two in  the borough.  Neither  of those                                                              
service areas  can afford  the cost  of providing quality  utility                                                              
functions,  nor  can they  afford  major  necessary  improvements.                                                              
This has  resulted in some health  and safety issues that  must be                                                              
addressed,  he said.   There  is  one service  area in  particular                                                              
that  has  already  raised  its  property  taxes  to  the  maximum                                                              
allowable mill  rate in order  to improve the wastewater  process.                                                              
The  citizens turned  to  a privately  held  water and  wastewater                                                              
corporation   to  provide   some  support.     He  admitted   that                                                              
unfortunately,  as the  borough  tries to  privatize  some of  the                                                              
services, inequities  in state  statute [come  to light],  in this                                                              
case, privately  owned utilities  not being  able to obtain  state                                                              
grants.   These  grants  allow  public  utilities to  improve  the                                                              
existing  infrastructure   without  placing  the   burden  on  the                                                              
ratepayer.  Under  this bill, the grants would  cover improvements                                                              
that are  currently "transparent"  to the  consumer, that  is, the                                                              
cost is  now passed through  to the consumer.   Under HB  119, the                                                              
company's   dollar   value  would   not   be  increased   by   the                                                              
improvements,  a   factor  prevented  by  the  RCA.     Mr.  Leone                                                              
concluded that the borough supports the passage of HB 119.                                                                      
                                                                                                                                
Number 0968                                                                                                                     
                                                                                                                                
KARA MORIARITY,  President and CEO,  Greater Fairbanks  Chamber of                                                              
Commerce, stated  that the chamber passed a resolution  of support                                                              
for  HB  119.   She  explained  that  the  chamber  supports  this                                                              
legislation  because  publicly  owned  utilities  have  access  to                                                              
state grant funds  for infrastructure development  while privately                                                              
owned  utilities  do  not.    In   this  regard,  privately  owned                                                              
utilities  and their  ratepayers  are penalized  because it  costs                                                              
more  to  develop  their  infrastructure.   If  a  privately  held                                                              
utility  was eligible  for  a grant,  according  to  the RCA,  the                                                              
investors in  the private  utility would not  profit from  the use                                                              
of those  grants; the financial  gain would  have to be  passed on                                                              
to the rate payers as a cost-saving measure.                                                                                    
                                                                                                                                
Number 1058                                                                                                                     
                                                                                                                                
MS.  MORIARITY explained  that  almost all  the  utilities in  the                                                              
Fairbanks  area are  privately owned  or owned  by a  cooperative.                                                              
Fairbanks  no  longer has  any  municipally-  or  government-owned                                                              
utilities.   The chamber board  members indicated that  they would                                                              
like  to  see  HB  119  expanded   to  allow  all  privately-owned                                                              
utilities  regulated by  the RCA  to  apply for  grants, not  just                                                              
water  and wastewater  utilities.   She  mentioned  that a  small,                                                              
privately owned  Natural Gas Company  faces an enormous  hurdle in                                                              
expanding its  lines in to more  areas in Fairbanks.   She said it                                                              
has  been a  huge challenge  and  investment for  that company  to                                                              
build its infrastructure.                                                                                                       
                                                                                                                                
MS.  MORIARITY noted  that giving  both  privately- and  publicly-                                                              
owned  utilities the  same access  for  grants for  infrastructure                                                              
development   would   promote   economic   development,   allowing                                                              
expansion  to customers  that  are not  currently  connected to  a                                                              
utility  system.   She said  that there  are lots  in the  borough                                                              
that  are  only 10  to  15  minutes  from downtown  that  are  not                                                              
connected to  the water  system.  She  concluded that  the chamber                                                              
supports  the  bill and  encourages  broadening  it to  allow  all                                                              
privately owned utilities  regulated by the RCA to  have access to                                                              
state grants.                                                                                                                   
                                                                                                                                
Number 1182                                                                                                                     
                                                                                                                                
ANDY WARWICK,  Chairman of the  Board, Fairbanks Sewer  and Water,                                                              
explained  that this  company was  formed in  1996 to acquire  the                                                              
City of  Fairbanks' water and wastewater  utility.  At  that time,                                                              
the  city  was  participating  only  minimally  in  grant  funding                                                              
because  there was  not much funding  available.   Now grants  for                                                              
water and  sewer projects appear  to be increasing  in importance.                                                              
Because Fairbanks  has privatized  its utilities,  it is  the only                                                              
community  in the state  that is  ineligible  to participate.   He                                                              
noted that  HB 119  remedies this  inequity by allowing  privately                                                              
owned  utilities  that are  regulated  by  the  RCA to  apply  for                                                              
grants under AS  46.03.030(b) [Environmental Conservation].   This                                                              
puts Fairbanks  ratepayers in the  same position as  ratepayers in                                                              
every  other city  in  the  state.   He  stressed  that under  RCA                                                              
regulation, all the  economic benefits of these  grants are passed                                                              
onto the  ratepayers; the utilities get  no rate of return  on the                                                              
plant,  or  any  depreciation  expense,   nor  can  the  rates  be                                                              
increased.   Economic regulation  [by the  RCA] essentially  makes                                                              
his  company  economically  neutral   under  this  bill,  and  the                                                              
benefits to the  ratepayer are obvious.  He said  that HB 119 will                                                              
reduce the  burden to  ratepayers for  improvements made  to water                                                              
and wastewater  systems.   It will  also increase  the ability  of                                                              
the  utility  to  expand  its  water  and  wastewater  systems  to                                                              
include  families  and  businesses  that currently  use  well  and                                                              
septic systems.                                                                                                                 
                                                                                                                                
Number 1282                                                                                                                     
                                                                                                                                
MR.  WARWICK  commented  that  the   vast  majority  of  Fairbanks                                                              
residents  are not  hooked up to  public water,  which results  in                                                              
sanitary problems  that could  be resolved  by connecting  them to                                                              
the utility system.                                                                                                             
                                                                                                                                
REPRESENTATIVE  ROKEBERG  noted  that  the  current  statute  that                                                              
covers municipalities  puts a cap of 50 percent  on eligible costs                                                              
for a  municipality  and, if HB  119 passes,  utility service  for                                                              
populations over  5,000 people.   He asked  if the 50  percent cap                                                              
is a problem.                                                                                                                   
                                                                                                                                
MR.  WARWICK  explained   that  he  wants  his   utility  and  his                                                              
ratepayers  to be  treated the  same  as other  communities.   The                                                              
change  wouldn't  benefit  or  penalize  the  utility;  it's  held                                                              
neutral.    There  are  benefits  to a  utility  of  having  happy                                                              
ratepayers,  for example,  when the  utility goes  before the  RCA                                                              
for a rate increase.                                                                                                            
                                                                                                                                
Number 1395                                                                                                                     
                                                                                                                                
JIM  STRANDBERG, Commissioner,  Regulatory  Commission of  Alaska,                                                              
described how the  RCA regulates small water and  sewer systems in                                                              
the state.   He said he agreed  with Mr. Warwick that  grant funds                                                              
in  Alaska  are  particularly  important  to reduce  the  cost  of                                                              
services to the  ratepayers, especially in  such capital-intensive                                                              
utilities as  water and  sewer systems.   He acknowledged  that in                                                              
Fairbanks, capital  needs are particularly high for  large network                                                              
systems,  given  the  permafrost  conditions  and  high  operating                                                              
costs.                                                                                                                          
                                                                                                                                
MR. STRANDBERG  noted that  in HB 119,  any utility that  is rate-                                                              
regulated by the  RCA would be eligible to apply for  a grant.  As                                                              
a result,  many  of the  small utilities  which the  RCA does  not                                                              
currently  regulate would  come to  RCA [in order  to qualify  for                                                              
these grants].   A legislative audit  recommended over a  year ago                                                              
that the  RCA determine  which classes  of small  water and  sewer                                                              
systems  it will  regulate.   He  said the  RCA  has held  citizen                                                              
advisory  meetings  and taken  extensive  public  comment; it  has                                                              
developed  regulations  for these  systems  and will  soon  accept                                                              
public comment on the regulations.                                                                                              
                                                                                                                                
MR. STRANDBERG  explained that  the public  sentiment is  that the                                                              
RCA  should  not  regulate  the  rates  of  many  of  the  smaller                                                              
utilities  but find  another way  to assure  ratepayers that  they                                                              
are being  treated fairly.  He  said many people  have recommended                                                              
that certain  classes of  utilities be  exempted totally  from RCA                                                              
regulation.    Another  type of  reduced  regulation  would  allow                                                              
utilities  to register with  the RCA  and agree  to comply  with a                                                              
model tariff.  In  a third class, the RCA would  rate-regulate the                                                              
larger utilities,  although no  break has  been set between  these                                                              
levels  yet.   He said  it's likely  that the  actual universe  of                                                              
rate-regulated water and sewer utilities may not be very large.                                                                 
                                                                                                                                
MR.  STRANDBERG  noted,  however,  if  the  RCA  elected  to  rate                                                              
regulate all  the utilities, the  statistics are daunting.   There                                                              
are  400 water  systems and  250  sewer systems  which qualify  as                                                              
utilities under  the statute.  If  the RCA chose  to rate-regulate                                                              
all  of  those,  the  RCA  would   be  faced  with  regulating  an                                                              
additional 237 water  utilities and 136 sewer utilities.   He said                                                              
that  the RCA  prepared an  indeterminate  fiscal note  on HB  119                                                              
because  staff  doesn't know  how  many  utilities will  be  rate-                                                              
regulated [under  the proposed regulations].   He  summarized that                                                              
RCA lauds  the bill with  its goal of  increasing access  to grant                                                              
money   to   build  infrastructure.      However,   he   cautioned                                                              
legislators to  anticipate the  impact on the  RCA as  it attempts                                                              
to lighten its regulatory load among smaller utilities.                                                                         
                                                                                                                                
Number 1655                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG   asked  whether  a  large   number  of                                                              
private  utilities  might come  forward  seeking  these water  and                                                              
sewer grants.                                                                                                                   
                                                                                                                                
MR. STRANDBERG  replied that  depends on  the ease of  application                                                              
for  the  grant  funds;  that  will   reveal  how  many  utilities                                                              
approach the  RCA to be regulated.   If the money is  easy to get,                                                              
he suggested that the RCA could be deluged.                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG asked  for the  definition of  a public                                                              
utility.                                                                                                                        
                                                                                                                                
Number 1735                                                                                                                     
                                                                                                                                
MR.  STRANDBERG  replied  that  the  RCA  statute  defines  public                                                              
utility in  AS 42.05.990  (4)(c) as  including every  corporation,                                                              
whether  public, cooperative  or  otherwise, company,  individual,                                                              
or association  of individuals,  that owns, operates,  manages, or                                                              
controls any plant,  pipeline or system furnishing,  water, steam,                                                              
or sewer  service to the public  for compensation.  The  public is                                                              
a group of 10  or more customers.  He said that  public utility is                                                              
well defined, and the definition is fairly inclusive.                                                                           
                                                                                                                                
REPRESENTATIVE GUTTENBERG  noted the language on page  2, lines 9-                                                              
14,  in which  a  utility serving  more  than  5,000 people  under                                                              
certain  circumstances  receives  a grant  of  60 percent  of  the                                                              
eligible costs.   He asked whether this 60 percent  figure is high                                                              
enough.                                                                                                                         
                                                                                                                                
MR.  STRANDBERG  replied that  the  dynamic  of grant  funding  in                                                              
Fairbanks  is  different than  in  rural  communities.   With  the                                                              
matching  fund requirement,  it  will be  highly variable  whether                                                              
the utilities  can raise the necessary  match.  He  commented that                                                              
it's more likely that larger communities will seek this funding.                                                                
                                                                                                                                
Number 1846                                                                                                                     
                                                                                                                                
REPRESENTATIVE   ROKEBERG  asked   about  the   total  number   of                                                              
certificated water systems under the RCA.                                                                                       
                                                                                                                                
MR. STRANDBERG  replied that there  are 400 water systems  and 250                                                              
sewer systems that quality as a utility.                                                                                        
                                                                                                                                
REPRESENTATIVE   ROKEBERG    noted   that   the    Department   of                                                              
Environmental  Conservation [DEC]  categorizes  the water  systems                                                              
by size.  He asked if the RCA uses similar categories.                                                                          
                                                                                                                                
MR. STRANDBERG  replied that  the two  agencies' categories  share                                                              
some  similarities.    The  RCA  statute  refers  to  10  or  more                                                              
customers being  a utility,  whereas DEC  regulations refer  to 15                                                              
or more  customers.  The  vast majority  of DEC water  systems are                                                              
Class A.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said  he's  seeking a  solution  to  Mr.                                                              
Strandberg's  concerns  about  a "gold  rush  on  his shop."    He                                                              
explained that he  is trying to clarify whether  the RCA regulates                                                              
all three levels of DEC utilities.                                                                                              
                                                                                                                                
MR. STRANDBERG  replied that the  RCA and DEC categories  are very                                                              
different  systems, but  he  said that  he  couldn't remember  the                                                              
exact DEC classes.                                                                                                              
                                                                                                                                
Number 1983                                                                                                                     
                                                                                                                                
REPRESENTATIVE   ROKEBERG  confirmed   that   the  RCA   statutory                                                              
authority is over  utilities serving 10 or more people.   He asked                                                              
if RCA has any other criteria for which utilities it regulates.                                                                 
                                                                                                                                
MR. STRANDBERG responded  that DEC tends to focus  on the [health]                                                              
risk of the water  quality and the number of customers.   He noted                                                              
that RCA  qualifications tend to  deal with ratepayers'  financial                                                              
concerns,  such  as  whether  they  are  represented  by  a  local                                                              
government unit  so they  don't need rate  regulation.   Also, the                                                              
RCA   classifications  recognize   that   regulating  very   small                                                              
utilities doesn't help the ratepayer because of its expense.                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG asked which classes RCA regulates.                                                                      
                                                                                                                                
MR. STRANDBERG replied  that the RCA is in the  process of putting                                                              
those classes together,  drafting the regulations  now in response                                                              
to extensive public comment.                                                                                                    
                                                                                                                                
Number 2068                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked whether  the  RCA currently  rate-                                                              
regulates the 400 water systems.                                                                                                
                                                                                                                                
MR.  STRANDBERG  replied that  currently,  the RCA  regulates  all                                                              
water  utilities that  are not  municipal systems.   He  confirmed                                                              
that all  400 water  systems are  currently rate-regulated  by the                                                              
RCA.                                                                                                                            
                                                                                                                                
REPRESENTATIVE  COGHILL   asked  whether  there   are  unregulated                                                              
municipal utilities.                                                                                                            
                                                                                                                                
MR.   STRANDBERG  replied   that  there   are  approximately   100                                                              
municipally owned  water and 70 municipally owned  sewer utilities                                                              
that are not regulated by the RCA.                                                                                              
                                                                                                                                
REPRESENTATIVE  COGHILL  stated  that he  may  have  inadvertently                                                              
excluded  municipal   utilities  from   having  access   to  these                                                              
matching grants.   The bill  states on  page 2, lines  16-17, that                                                              
public  utilities must  be regulated  by the  RCA in  order to  be                                                              
eligible for these matching grants.                                                                                             
                                                                                                                                
Number 2145                                                                                                                     
                                                                                                                                
MR. STRANDBERG  referred  to the  language on  page 1, lines  [13-                                                              
14],  subsection   (e),  "A   grant  under   this  section   to  a                                                              
municipality  or  public  utility   eligible  under  (i)  of  this                                                          
section..."   He said he interprets  this as [including  municipal                                                          
utilities not regulated by the RCA].                                                                                            
                                                                                                                                
REPRESENTATIVE COGHILL thanked him for that clarification.                                                                      
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said he  appreciates  the RCA  following                                                              
the  legislative  audit  recommendation   to  remove  small  water                                                              
utilities  from  RCA  regulation.    He  asked  if  the  committee                                                              
limited the eligible  rate-regulated water and sewer  utilities in                                                              
HB 119 to  those currently regulated  by the RCA, would  that help                                                              
[protect  the  RCA  from  being  overwhelmed  by  requests  to  be                                                              
regulated]?                                                                                                                     
                                                                                                                                
MR.   STRANDBERG   responded  that   it   would   depend  on   the                                                              
availability  of funds and  on whether other  funds could  be used                                                              
to meet the matching requirement.                                                                                               
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked whether there are  additional water                                                              
and  sewer  utilities,   beyond  the  400  water   and  250  sewer                                                              
utilities, that  would ask  to be regulated  [in order  to qualify                                                              
for these grants].                                                                                                              
                                                                                                                                
CHAIR ANDERSON  asked if the  committee needs to  change something                                                              
in the bill to cover this other group.                                                                                          
                                                                                                                                
MR. STRANDBERG responded  that HB 119 currently  makes any utility                                                              
that  is  rate-regulated by  the  RCA  eligible  [to apply  for  a                                                              
grant].   He said  there are currently  21 economically  regulated                                                              
water utilities  in the state now.   Those would be  eligible [for                                                              
grants  under  HB   119]  if  the  RCA  implemented   its  [draft]                                                              
regulations.                                                                                                                    
                                                                                                                                
Number 2299                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he assumes that because  RCA has the                                                              
authority   to  rate-regulate   all  400   water  utilities,   the                                                              
utilities  would   qualify  for  grants  under  this   bill.    He                                                              
reiterated  that RCA  has the  authority to  regulate those  small                                                              
water utilities serving 10 or more people.                                                                                      
                                                                                                                                
MR.  STRANDBERG  agreed  and  said   that  if  the  utilities  are                                                              
economically regulated, they need to file a tariff with the RCA.                                                                
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if there  are systems that  are not                                                              
economically regulated now.                                                                                                     
                                                                                                                                
Number 2334                                                                                                                     
                                                                                                                                
MR. STRANDBERG  said that  a significant number  of the  water and                                                              
sewer  utilities  are  not  regulated   because  they  have  never                                                              
approached the RCA.                                                                                                             
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked   how  many  water  utilities  are                                                              
currently regulated by RCA.                                                                                                     
                                                                                                                                
MR. STRANDBERG replied  that the RCA currently  regulates 21 water                                                              
utilities.                                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG  confirmed that only those  utilities that                                                              
have  approached the  RCA and  asked for  economic regulation  are                                                              
currently certified as economically regulated now.                                                                              
                                                                                                                                
TAPE 03-23, SIDE B                                                                                                            
Number 2357                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked whether these other  [400 water and                                                              
250 sewer] utilities have filed no tariffs with the RCA.                                                                        
                                                                                                                                
MR. STRANDBERG  stated that  is correct.   He said the  reason for                                                              
the  legislative   audit  [recommendation]  is  that   many  small                                                              
organizations  in  small  communities have  never  approached  the                                                              
RCA.   He added  that it has  been a  significant question  of how                                                              
the RCA  should regulate [these  utilities] to protect  the public                                                              
safety.                                                                                                                         
                                                                                                                                
Number 2336                                                                                                                     
                                                                                                                                
CHAIR  ANDERSON asked  the sponsor  if he  would like  to look  at                                                              
these technical  questions and  bring the  bill back to  committee                                                              
for consideration at the next meeting.                                                                                          
                                                                                                                                
REPRESENTATIVE  COGHILL  replied that  the  technical question  is                                                              
[how  many  utilities RCA  regulates  now  and  how many  will  it                                                              
regulate in the  future].  He said there is no  technical question                                                              
about how the  bill works.  The  bill has a referral  to the House                                                              
Finance Standing  Committee, and that committee could  [review the                                                              
number of  utilities that would  be eligible].   He said  he would                                                              
like to see the  bill move [today] if this committee  supports the                                                              
policy [of grants to privately-held utilities].                                                                                 
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  he remains  concerned about  who is                                                              
really  going to  be eligible  [to apply  for these  grants].   He                                                              
said he thought he  could amend the bill to limit  it to those who                                                              
are currently regulated  [by the RCA] but he's not  sure what that                                                              
would mean.   The  RCA trying  to meet  the recommendation  of the                                                              
Legislative Budget  and Audit Committee by limiting  the number of                                                              
small  utilities  that  it  regulates   seems  to  work  at  cross                                                              
purposes to HB 119, he said.                                                                                                    
                                                                                                                                
Number 2263                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  said this  bill would allow  [utilities to                                                              
apply  for grants]  based  on how  they  are  certified under  the                                                              
RCA's tier system.                                                                                                              
                                                                                                                                
REPRESENTATIVE ROKEBERG  commented that if the bill  included only                                                              
those  21 water  systems currently  regulated [by  the RCA],  many                                                              
small water systems wouldn't qualify under HB 119.                                                                              
                                                                                                                                
Number 2248                                                                                                                     
                                                                                                                                
DAVE HARBOUR, Chair,  Regulatory Commission of  Alaska), described                                                              
the problem of  timing.  A legislative audit  recommended that the                                                              
RCA limit  the regulation  of small  utilities so that  regulation                                                              
costs could  be minimized and public  safety maintained.   Yet, he                                                              
pointed out,  HB 119 presents  an opportunity for  improvements to                                                              
many small  utilities without cost  to their ratepayers.   He said                                                              
Representative  Rokeberg is  on  point.   If the  sponsor and  the                                                              
committee  passes HB  119 on  to  the finance  committee, the  RCA                                                              
would  supply  information  [to   answer  these  questions],  even                                                              
though the  RCA is  still developing its  regulations.   RCA staff                                                              
anticipated having those regulations completed by summer.                                                                       
                                                                                                                                
COMMISSIONER HARBOUR  noted that the  [challenge] is to  write the                                                              
definition [of  rate-regulated utilities]  so that those  who want                                                              
to take  advantage of  grants may  do so and  so that  there's the                                                              
appropriate reporting  [to the RCA] of  the grant money.   He also                                                              
noted the  committee's goal to  include those utilities  that wish                                                              
minimal regulation.   That's the language the RCA  and the sponsor                                                              
will have to work on, he said                                                                                                   
                                                                                                                                
Number 2172                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG  explained that  the real problem  here is                                                              
defining which utilities  qualify.  He noted that  HB 119 uses the                                                              
DEC  statute  to  define  utilities because  it  has  an  existing                                                              
system in  place.   That might narrow  the scope  a bit,  he said,                                                              
but the question  becomes a policy issue--to what  degree does the                                                              
legislature  want  to limit  utilities  [from applying  for  grant                                                              
funds].  For  example, in urban Anchorage, there  are 3,000 people                                                              
on  well water;  [their water  systems  will be  impacted] by  the                                                              
2006 target  date in  the federal Clean  Water Act,  which changes                                                              
the standards for  arsenic.  He said he hopes  these small private                                                              
water systems  would qualify  for these  grants.   But there  is a                                                              
problem  with the  unintended impact  of the  RCA's new  direction                                                              
[of reducing the number of utilities it regulates].                                                                             
                                                                                                                                
Number 2084                                                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL agreed.                                                                                                  
                                                                                                                                
REPRESENTATIVE  ROKEBERG noted  that HB  119 is  placed under  the                                                              
DEC title,  so perhaps the bill  should focus on  DEC's definition                                                              
of small utilities.                                                                                                             
                                                                                                                                
COMMISSIONER HARBOUR agreed with this idea.                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  said he is  willing to have the  bill held                                                              
in committee while that idea is explored.                                                                                       
                                                                                                                                
Number 2063                                                                                                                     
                                                                                                                                
CHAIR  ANDERSON said  the  bill  can be  brought  back before  the                                                              
committee as soon as the sponsor is ready.                                                                                      
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  suggested  that  any  changes  in  the                                                              
bill's language should avoid conflicts [with the RCA's statute].                                                                
                                                                                                                                
Number 2033                                                                                                                     
                                                                                                                                
DAN  EASTON,   Director,  Facility  Construction   and  Operation,                                                              
Department   of  Environmental   Conservation,   in  response   to                                                              
Representative  Rokeberg,   explained  how  DEC   categorizes  the                                                              
smaller  water  systems.    He   said  the  different  classes  of                                                              
drinking  water  systems  are  subject   to  different  regulatory                                                              
requirements.    These classes  don't  have  anything  to do  with                                                              
DEC's  grant  program.    The  Class  A  water  system  serves  25                                                              
residents or  more per  day; the Class  B serves 25  nonresidents,                                                              
for example,  in a restaurant; a  Class C system serves  less than                                                              
25  people.     There  is  no   alignment  between  RCA   and  DEC                                                              
classifications  because  of  the   different  purposes  of  these                                                              
schemes.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  ROKEBERG  asked  how  many systems  fall  in  each                                                              
category.                                                                                                                       
                                                                                                                                
MR.  EASTON  replied  that  there   are  approximately  650  water                                                              
systems  in the  Class  A.   In commenting  on  the difference  in                                                              
numbers between  the two  agencies, he said  RCA is  interested in                                                              
water systems  that charge  a rate for  the water, whereas  DEC is                                                              
interested in all drinking water systems.                                                                                       
                                                                                                                                
Number 1973                                                                                                                     
                                                                                                                                
REPRESENTATIVE  COGHILL  confirmed that  a  hotel complex's  water                                                              
system  was an  example of  a system  that didn't  charge for  its                                                              
water.                                                                                                                          
                                                                                                                                
REPRESENTATIVE   ROKEBERG  said   the  information   on  the   DEC                                                              
classifications   does  not  help   [the  committee   resolve  the                                                              
problem].   He said  there's only so  much grant money  available.                                                              
He  pondered  whether  the  sponsor  could  design  some  kind  of                                                              
criteria  rather than  using economic  regulation [by  RCA].   The                                                              
criteria of a regulated  rate is not sufficient because  it is too                                                              
broad.                                                                                                                          
                                                                                                                                
REPRESENTATIVE COGHILL  said he wanted to make  the criteria broad                                                              
so there would  be some competition  at the grant level.   He said                                                              
that  grant awards  will be  based on  both the  ability to  match                                                              
[grant moneys]  and the ability to  perform.  He said  he realized                                                              
that  there  would  be  different   classes  of  regulated  groups                                                              
[competing].   He said he does  not believe he is  going crosswise                                                              
with  the RCA  but  is willing  to  hold the  bill  over for  that                                                              
discussion.                                                                                                                     
                                                                                                                                
Number 1864                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  the fix  is to  amend this  bill to                                                              
qualify  those who  are  rate-regulated or  who  qualify for  rate                                                              
regulation  as  a  "date  certain;"  that  would  not  affect  the                                                              
outcome of  the pending RCA regulations.   That way,  RCA wouldn't                                                              
get a  rush of people into  their office; those  utilities already                                                              
qualify  under  the  current  definitions.     By  using  a  "date                                                              
certain,"  the  legislature  avoids   the  problem  of  unintended                                                              
consequences of this bill.                                                                                                      
                                                                                                                                
REPRESENTATIVE  COGHILL  responded  that  then there  would  be  a                                                              
tiered qualification  that  was broad until  RCA regulations  were                                                              
finalized,  and he  said he  did not like  that option.   He  said                                                              
he'd rather  leave [the field  of potential applicants]  broad; he                                                              
does  not anticipate  a  rush  [for  grants], given  the  economic                                                              
condition of Alaska.                                                                                                            
                                                                                                                                
Number 1802                                                                                                                     
                                                                                                                                
REPRESENTATIVE  ROKEBERG confirmed that  the number  of interested                                                              
applicants [among  utilities] would be self-limiting,  [determined                                                              
by whether]  the utility wanted  to be regulated  by the RCA.   He                                                              
said this  would force  small utilities  into rate-regulation  [by                                                              
the RCA].                                                                                                                       
                                                                                                                                
REPRESENTATIVE  COGHILL said  that would  be part  of the  market-                                                              
driven approach  for any community  that would apply for  a grant.                                                              
He  said he  was willing  to discuss  this further  with the  RCA,                                                              
which could be done in the next committee of referral.                                                                          
                                                                                                                                
REPRESENTATIVE GUTTENBERG  asked Mr.  Easton about the  60 percent                                                              
match  for systems  that incorporate  resource  recovery [per  the                                                              
language on  page 2,  lines 13-14].   He asked  if there  would be                                                              
any benefit to having this 60 percent rate higher.                                                                              
                                                                                                                                
Number 1724                                                                                                                     
                                                                                                                                
MR.  EASTON noted  that this  language  is an  old provision  that                                                              
applies to  solid waste projects and  allows for the state  to pay                                                              
60 percent instead  of 50 percent of a project's cost  as a way to                                                              
entice  solid waste  systems  to do  recycling.   Privately  owned                                                              
solid  waste  processing  systems  would not  qualify  for  grants                                                              
under  this  bill.    In Section  3,  page  2,  lines  15-18,  the                                                              
reference  to   projects  described  under  (b)(1)-(3)   does  not                                                              
include solid waste processing.                                                                                                 
                                                                                                                                
REPRESENTATIVE  ROKEBERG asked if  the sponsor's  goal is  to make                                                              
[the field]  as broad  as possible and  let the competitive  grant                                                              
process  winnow  out [a  large  number  of  applicants].   But  he                                                              
encouraged Representative  Coghill to consider RCA's  offer to see                                                              
how to avoid a "run on the bank."                                                                                               
                                                                                                                                
Number 1645                                                                                                                     
                                                                                                                                
REPRESENTATIVE ROKEBERG moved to report CSHB 119, Version 23-                                                                   
LS0617\D,   Craver,  3/12/03,  from   committee  with   individual                                                              
recommendations and  the accompanying indeterminate  fiscal notes.                                                              
There  being no  objection, CSHB  119(L&C) was  reported from  the                                                              
House Labor and Commerce Standing Committee.                                                                                    
                                                                                                                                

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