Legislature(2005 - 2006)CAPITOL 17
04/15/2005 03:15 PM LABOR & COMMERCE
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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 capability. 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 overhead. 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 regulation. 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.