Legislature(2005 - 2006)CAPITOL 17

04/15/2005 03:15 PM LABOR & COMMERCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSHB 181(L&C) Out of Committee
Moved Out of Committee
Bills Previously Heard/Scheduled
Moved CSHB 226(L&C) Out of Committee
HB 243-REG. COST CHARGES: UTILITIES/PIPELINES                                                                                 
REPRESENTATIVE KOTT  announced that  the final order  of business                                                               
would be  HOUSE BILL  NO. 243,  "An Act  relating to  the maximum                                                               
annual regulatory  cost charge  collected from  certain regulated                                                               
public  utilities and  pipeline  carriers; and  providing for  an                                                               
effective date."                                                                                                                
KATE GIARD, Commissioner, Chair,  Regulatory Commission of Alaska                                                               
(RCA), began by  informing the committee that one  of the reasons                                                               
she ran  for chair was  because she  felt there were  many issues                                                               
the RCA  needed to  address before its  renewal comes  before the                                                               
legislature in 2007.  She  recalled that she was confirmed during                                                               
the  so-called "phone  wars" in  2003 and  thus she  was familiar                                                               
with the frustrations the legislature had  with the RCA.  As soon                                                               
as she became  chair, she began an outreach effort  to the public                                                               
utilities and  pipelines that it  regulates in order to  find out                                                               
more about how the RCA doesn't meet the needs of those entities.                                                                
3:51:23 PM                                                                                                                    
MS.  GIARD  said that  the  aforementioned  entities expressed  a                                                               
great deal  of frustration related to  any number of areas.   She                                                               
said that the  RCA has a tremendous amount of  work before it can                                                               
come before  the legislature in  2007 and  say that it  has dealt                                                               
with the  concerns of  2003.   Part of  the frustration  from the                                                               
utilities  and the  pipelines is  because they  don't know  where                                                               
their materials  are when they  enter the RCA.   Furthermore, the                                                               
RCA itself frequently doesn't know  where the materials are.  Ms.                                                               
Giard stated that  the RCA lacks systems,  management, and normal                                                               
ongoing processes expected to track,  follow, monitor, and manage                                                               
data in order to get its work done in a timely manner.                                                                          
MS. GIARD informed the committee  that the legislation before the                                                               
committee is the result of  a group effort between the utilities,                                                               
the  pipeline companies,  and the  RCA.   This  legislation is  a                                                               
proposal to fund several  information technology (IT) initiatives                                                               
to  bring the  RCA  up to  "snuff" and  allow  the utilities  and                                                               
pipeline companies to interact with the  RCA at a much lower cost                                                               
to all  parties.   The systems that  this funding  mechanism will                                                               
support  are  laid out  in  a  letter  to  Chair Anderson.    She                                                               
explained that the 2 percent  increase is for a three-year period                                                               
and will  terminate on  July 1, 2008.   The goal  is to  bring in                                                               
sufficient  additional revenues  to support  the acquisition  and                                                               
implementation of these systems after  which the RCA would return                                                               
to  its current  funding level.   Ms.  Giard concluded  by noting                                                               
that she would appreciate the committee's support of HB 243.                                                                    
3:54:10 PM                                                                                                                    
REPRESENTATIVE KOTT  said that he  is fairly confident  that this                                                               
legislation  will bring  about some  efficiencies  that have  not                                                               
been addressed in the past.                                                                                                     
REPRESENTATIVE GUTTENBERG  asked if there  will be a way  the RCA                                                               
can  evaluate  these changes  each  year  and  show that  to  the                                                               
legislature or the regulated entities.                                                                                          
MS. GIARD informed  the committee that the  utilities, during the                                                               
public hearing  process, asked for  an advisory group.   She said                                                               
that  the  advisory  group  will  be  kept  active  and  informed                                                               
throughout the process.   The information, she  opined, will flow                                                               
freely [between  the RCA  and the  regulated entities]  such that                                                               
the legislature will not receive  complaints as the RCA improves.                                                               
However,  she acknowledged  that  there will  still  be areas  in                                                               
which the  RCA makes  decisions with  which the  public utilities                                                               
aren't happy.   If those  decisions and requests  for information                                                               
are made in a timely fashion,  the complaining about the RCA will                                                               
stop, she opined.                                                                                                               
3:57:24 PM                                                                                                                    
REPRESENTATIVE  GIARD,   in  response  to   Representative  Kott,                                                               
explained that  her term  as chair  is only for  four years.   In                                                               
further  response to  Representative  Kott,  Ms. Giard  explained                                                               
that the  RCA will move to  an electronic filing method,  but not                                                               
mandate  such   because  smaller   entities  may  not   have  the                                                               
3:59:08 PM                                                                                                                    
REPRESENTATIVE ROKEBERG said that  although he shared Ms. Giard's                                                               
desire to  quiet the controversy  surrounding the RCA,  he wasn't                                                               
as optimistic  even if everything is  achieved under HB 243.   He                                                               
then inquired  as to the history  of the RCA's rate  structure in                                                               
the last decade or so.                                                                                                          
MS.  GIARD noted  that she  had provided  Representative Rokeberg                                                               
with a letter  discussing the revenue history.   She informed the                                                               
committee that  the RCA  has historically been  at .8  percent of                                                               
regulated revenues  from 1995-2004.   In 2004 it was  raised from                                                               
1.7  percent to  8.7 percent  of which  1.7 percent  goes to  the                                                               
Department of Law to fund  the public advocate; the RCA's portion                                                               
was reduced  to .7 percent.   Therefore, the RCA now  collects .7                                                               
percent of  total regulated  revenues and  the Department  of Law                                                               
collects 1.7  percent to fund  its actions.  Ms.  Giard specified                                                               
that the RCA  collects about $5.2 million to  fund its operations                                                               
this year.                                                                                                                      
REPRESENTATIVE  ROKEBERG asked  if  the  Department of  Commerce,                                                               
Community, & Economic  Development (DCCED) takes any  part of the                                                               
monies collected under the RCA.                                                                                                 
MS. GIARD  confirmed that the  RCA is  assessed intergovernmental                                                               
charges for its lease, accounting,  and administration in similar                                                               
fashion to any agency that is an arm of DCCED.                                                                                  
4:01:54 PM                                                                                                                    
REPRESENTATIVE ROKEBERG  commented that the committee  has always                                                               
looked at that  overhead burden with a great  amount of interest.                                                               
Therefore, he  surmised that  this increase  would be  subject to                                                               
the same allocation to overhead to the commissioner's office.                                                                   
4:02:12 PM                                                                                                                    
MS. GIARD expressed her hope that  it wouldn't be.  She explained                                                               
that those  numbers are  fairly fixed  and will  come out  of the                                                               
RCA's  budget.    Furthermore,  those numbers  are  based  on  an                                                               
allocation formula DCCED  uses.  The money that  the RCA collects                                                               
will  come into  the operating  revenue rather  than the  capital                                                               
revenue and  then the RCA  will contract with a  project manager,                                                               
put out  request for proposals  (RFPs), and purchase  the systems                                                               
necessary.   Because the total  amount that  the RCA is  going to                                                               
spend could  be $2-$3 million, she  didn't want the money  to sit                                                               
on  the capital  side  because it's  money  that ratepayers  have                                                               
paid.   With  the money  coming into  the operating  account, any                                                               
leftover money  falls to the next  year and reduces the  need for                                                               
the  RCA in  that  next  year.   Therefore,  Ms.  Giard said  she                                                               
anticipated  collecting  the full  $3  million  that the  utility                                                               
advisory group  said might be  necessary.  If that  [full] amount                                                               
isn't necessary, it  will fall to the bottom line  and reduce the                                                               
regulatory cost charge (RCC) rate  for the ratepayers in the next                                                               
year.   Ms. Giard  said she  would make  sure that  DCCED doesn't                                                               
take additional overhead.                                                                                                       
4:04:13 PM                                                                                                                    
REPRESENTATIVE GUTTENBERG asked if,  under this proposal, the RCA                                                               
is  taking   into  consideration  the  possibility   of  a  major                                                               
expansion of Alaska's gas industry.                                                                                             
MS. GIARD opined that she wasn't  sure that a gas expansion would                                                               
occur  during  the  three-year  period  in  which  the  RCCs  are                                                               
collected.   Therefore,  the expansion  probably will  not impact                                                               
the amount we  collect.  With regard to whether  the systems will                                                               
be  sufficient  to  address more  regulated  efforts,  Ms.  Giard                                                               
highlighted that the  system will be designed to  be flexible and                                                               
contract as necessary.                                                                                                          
4:05:21 PM                                                                                                                    
REPRESENTATIVE KOTT  announced that the  committee has a  copy of                                                               
Ms.  Giard's letter  to Representative  Rokeberg,  which will  be                                                               
included in the committee packet.                                                                                               
REPRESENTATIVE  ROKEBERG expressed  concern  that  Ms. Giard  has                                                               
mentioned a $3  million budget while the fiscal note  is for $3.9                                                               
million.  He  expressed concern specifically for  the $900,000 in                                                               
MS. GIARD  said that the RCA  doesn't know the total  amount that                                                               
it  will   collect  because  it's  based   on  regulated  utility                                                               
revenues.   The inability to have  a fixed amount is  part of the                                                               
reason why  any amount that  isn't spent  will be used  to reduce                                                               
the RCC for the next year.                                                                                                      
4:07:28 PM                                                                                                                    
RICK  FREYMILLER,  Director,   Regulatory  Affairs  and  Pricing,                                                               
Chugach  Electric   Association,  informed  the   committee  that                                                               
Chugach Electric  Association is the largest  electric utility in                                                               
the state.   On  behalf of Chugach  Electric Association  and its                                                               
retail members, Mr. Freymiller testified  in favor of the HB 243,                                                               
which provides a  modest increase in the RCC to  allow the RCA to                                                               
implement  an  IT  plan.     He  related  that  Chugach  Electric                                                               
Association  believes this  will  be  a significant  productivity                                                               
enhancement  for  the  RCA  as  well  as  for  the  utilities  it                                                               
regulates.   As stated earlier,  [the utility business]  needs to                                                               
share  significant  amounts  of  information  in  order  for  all                                                               
involved to be  informed and make good decisions.   Increased use                                                               
of  information  technology  can significantly  enhance  industry                                                               
productivity  and ultimately  result in  lower costs  to members.                                                               
Mr. Freymiller  relayed that the Chugach  Electric Association is                                                               
pleased  that the  RCA  has  established a  working  group of  IT                                                               
professionals  from its  staff  as well  as  from the  utilities;                                                               
working  together ensures  that all  individual efforts  can mesh                                                               
together to effectively produce  required information in a timely                                                               
manner.  The aforementioned will  result in less time being spent                                                               
producing  information  and   more  time  addressing  substantive                                                               
issues in the regulatory process.   In conclusion, Mr. Freymiller                                                               
urged the committee to pass HB 243.                                                                                             
4:09:11 PM                                                                                                                    
DAN  DIECKGRAEFF, Treasurer/Manager,  Finance  and Rates,  ENSTAR                                                               
Natural  Gas  Company,  began by  informing  the  committee  that                                                               
ENSTAR is  the largest  energy utility  in the  state.   He noted                                                               
that he  has dealt with the  RCA and its predecessor  for over 20                                                               
years.   Mr.  Dieckgraeff  related ENSTAR's  support  for HB  243                                                               
because it  can see  the efficiencies  the proposed  systems will                                                               
bring to  the RCA and  the utilities it  regulates.  Some  of the                                                               
advantages   include  tracking   cases  and   costs,  researching                                                               
precedence, providing  information in  a more timely  fashion for                                                               
everyone involved, and  saving on storage costs.  As  a result of                                                               
this proposal, the ratepayers will  save money and receive better                                                               
REPRESENTATIVE  KOTT,  upon  determining there  were  no  further                                                               
witnesses wishing to testify, closed public testimony.                                                                          
REPRESENTATIVE ROKEBERG moved  to report HB 243  out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.  There being no objection, it was so ordered.                                                                            

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