Legislature(2003 - 2004)
03/08/2004 08:07 AM House STA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 520-REGULATORY COMMISSION OF ALASKA Number 0670 CHAIR WEYHRAUCH announced that the last order of business was HOUSE BILL NO. 520, "An Act relating to the expenses of investigation, hearing, or public advocacy before the Regulatory Commission of Alaska, to calculation of the regulatory cost charge for public utilities and pipeline carriers to include the Department of Law's costs of its public advocacy function, to inspection of certain books and records by the attorney general when participating as a party in a matter before the Regulatory Commission of Alaska; and providing for an effective date." Number 0646 DANIEL PATRICK O'TIERNEY, Senior Assistant Attorney General, Commercial/Fair Business Section, Civil Division (Anchorage), Department Of Law, stated that he is testifying on behalf of the attorney general. He said he is quite familiar with not only the bill, but also with the Regulatory Commission of Alaska (RCA) in the public advocacy function, having served on the commission under two prior governors from 1989 to 1994. He continued as follows: This bill is before you ... as a ... "follow-on" to last year's Executive Order [EO] 111, which transferred the responsibility from the Regulatory Commission of Alaska personnel for public advocacy before the commission, to the attorney general's office. And that executive order also established the public advocacy function within the Department of Law. RCA personnel were historically responsible for representing the public and the public interest before the commission, and those personnel now act under the authority and the direction of the Department of Law. So, the bill before you would essentially complete what's already occurred - the prior transfer of authority. Number 0562 CHAIR WEYHRAUCH asked, "Why not simply do this by another executive order?" MR. O'TIERNEY replied that that had been considered but was judged as inappropriate, because an executive order has limited applicability and only exists to transfer existent statutory responsibilities. He explained that that transfer has already occurred. He clarified that [HB 520] would actually provide "some of the wherewithal for execution of the authority that's already been transferred." MR. O'TIERNEY continued as follows: This bill contains, principally, four provisions, the first of which would clarify that regulatory cost charge receipts - not general fund - would continue to pay for the general costs of public advocacy function that's now administered by the Department of Law and by the attorney general as the public advocate, just as those same RCC receipts historically paid for public advocacy costs when the function was performed under the RCA. MR. O'TIERNEY, in response to a question from Chair Weyhrauch, explained that RCC stands for regulatory cost charge, which is the existent statutory mechanism that funds the regulatory commission of Alaska, and historically also funded the public advocacy function, which was exercised within the commission. He called it "off-budget," and said it's not generally funded. He said he thinks the RCC is premised on a user-fee concept; the utility providers are essentially tied to pay for the regulation that administers the services and the rates that "they provide under their monopoly." In response to a question from Chair Weyhrauch, he said that, under the statute itself, the RCC administers the regulatory cost-charge formula and its applicability. He noted that there is a statutory cap that exists on the total amount of funds that can be administered under the RCC. Number 0268 CHAIR WEYHRAUCH clarified he wants to know: At what point does the public pay for "every and all costs"; who is it that arbitrates what is reasonable or not; where is the cap set; and why should the public continually "pay this up" when it doesn't know what goes on in the disputes. MR. O'TIERNEY answered that the statute provides a specific decimal number cap, as well as explicitly providing that any given utility may pass through the regulatory cost charge to its consumers. That charge is shown at the bottom of any given [utility] bill. The consumers are the beneficiaries of the advocacy that's provided on their behalf before the commission. Mr. O'Tierney continued as follows: Absent that advocacy ... you would essentially have one hand clapping, for the most part, at any given utility rate proceeding, because the utility comes before the commission and it's generally asking for a rate increase, not a rate decrease, and absent some other party on behalf of the public, there would simply be the utility making its case without any meaningful ... cross-examination or review. So, it seems perfectly logical, and prudent, and appropriate that consumers would ultimately bear the cost; it's consistent with the entire user-fee concept, which is certainly not held in disfavor [at the] current time. Number 0068 CHAIR WEYHRAUCH stated his belief that the public does need an advocacy position in these hearings, because its interests are seldom represented; therefore, [the public] should have a legitimate role to play and some legitimate costs incurred for that role. However, he noted that simply having that advocacy role may create an adversarial situation for the utilities to be involved, which in turn "ramps up the cost to the public because of the overhead involved with advocating its own interest against the public's interest." TAPE 04-32, SIDE A Number 0001 CHAIR WEYHRAUCH indicated that everything would get paid for through the regulatory cost charge. He said it's a conundrum and he is expressing concern. He invited Mr. O'Tierney to continue. MR. O'TIERNEY responded that he appreciates Chair Weyhrauch's comments; however, he surmised that the bottom line is that consumer protection has to be funded in some fashion, and under the current scheme ... - as exists in statute and as promulgated by prior legislature - it is paid for by the consumers who benefit. He noted that the vast majority of states have a variation of a regulatory cost charge mechanism. Number 0117 CHAIR WEYHRAUCH offered his understanding that the attorney general's office defines the public's interest; it doesn't conduct a poll of the representatives of the state in the legislature, but makes its independent determination of what the public's interest is and then advocates that interest. MR. O'TIERNEY answered that's correct. He said that's what EO 111 provides for and it is not unlike the existent context in most other states. He noted that he has discussed with Attorney General Renkes the notion of adopting something similar to what exists in Washington State, which is a type of consumer input panel whose members are nominated by the attorney general as a means of having some kind of a consumer representative council that provides ongoing input and can keep the public advocate "on the pulse of consumer interests and concerns." He added that that's not something that necessarily needs to be embodied in statute. CHAIR WEYHRAUCH said something like that may be critically important to gain the public's trust in the process, whether it's a consumer input panel or whether the department's position is publicly noticed with an opportunity for the public to comment. He said, "I know you need to act and react without having a cumbersome public process. I know that there's a tension here between being able to be involved in these proceedings, yet also representing the public's interest." If the Department of Law purports to represent the public's interest, he said, then the public must necessarily be involved in expressing what those interests are. MR. O'TIERNEY said he thinks it's useful to recall that, in terms of what the public interest did, "it certainly includes - first and foremost - rate payer interest, consumer interest." He offered his understanding that those interests are generally defined in terms of taking a hard look at whether or not the type of expenses that the utility suggests are legitimate for inclusion in rate base are, in fact, legitimate and can be adequately justified. He explained, "Those are the stuff of which rates are made, and I think most consumers are interested in making sure that rates are ... not higher than they can honestly and legitimately be justified." CHAIR WEYHRAUCH stated that that too is subject to some debate, because it may be in the public's interest to pay the least amount for the utility services it's obtaining, but it may be also important to pay now in order to pay less later. He illustrated that many companies, particularly in utilities markets, must invest in research and development in order to obtain technology that eventually is going to reduce costs in the long term, which requires a higher investment today for greater return on the investment tomorrow. He said there's a public process in adequately explaining that to the public so it knows what it's getting. MR. O'TIERNEY replied that that's part of the balance. He indicated the question of balance is often the focus of the commission. He added, "Ultimately, of course, the commission itself, as the adjudicator, gets to make the call." Number 0386 REPRESENTATIVE GRUENBERG emphasized that he likes the idea of having a citizen advisory commission to the attorney general, since the citizen protection arm office has been moved "from the agency itself to the attorney general." He stated that he does not support an elected attorney general but likes the idea of an appointed one, even though it's subject to some continuing criticism on the close relationship between the [governor's office] and the attorney general. REPRESENTATIVE GRUENBERG asked if the commission still regulates garbage disposal. MR. O'TIERNEY answered yes. REPRESENTATIVE GRUENBERG noted that part of the City of Anchorage's solid waste services are from the municipality, while part of those services are from [a private company]. He said part of his district is served by one and part by the other. He said the rates are similar; however, he offered his recollection that the municipality will pick up four refuse containers, while [the private company] will only pick up three. He opined that that is unfair and suggested that the commission could consider that issue. Number 0798 MR. O'TIERNEY continued with his testimony. He stated that the second principal area of the bill addresses providing the Department of Law - in its public advocacy function and with respect to that function only - the same access to utility records that formerly had been obtainable by the RCA's public advocacy staff. He said that although it speaks to a substantive aspect of things, it is not a substantive change, because the intent is to transfer the same access to records previously possessed by the RCA to the Department of Law. MR. O'TIERNEY stated that the third principal area of the bill is one that "would explicitly exempt state agencies from paying the cost of the RCA - another state agency - its proceedings to which a state agency is a party." The current situation is that the RCA interprets the existing statute, which does not either expressly include or exclude cost allocation of its proceedings to other state agencies. The proposed legislation, he indicated, would explicitly exempt other state agencies from being cost allocated and then paying those costs to the RCA. He continued as follows: Not only is there no net fiscal benefit into the current arrangement, but ... it's compounded because, for example, if the Department of Law is cost allocated, it then has to come to the legislature to get a special appropriation in order to pay the cost allocation to another state agency. Number 0943 MR. O'TIERNEY noted that "the proposed legislation would provide for direct payment, in a specific proceeding, by the utility, of the cost of any expert assistance that may need to be retained by the Department of Law to represent the public in that specific proceeding." He said the utilities could recover that case-specific cost in the same manner as any other rate case expense. He continued: It's consistent with the cost-causer principle and user-fee principle that is the basis of the RCC. It's also ... analogous to other existent mechanisms in state statute, those being, in particular, one which exists in the insurance code, which allows the director of insurance to have the insurer being examined pay the costs of any expert that the director needs to retain to do the examination. It's also analogous ... to a mechanism in the Alaska Stranded Gas Development Act, which provides that the commissioner may, essentially, pay an independent contractor expert for a review, and that those expenses would be paid for by the applicant. ... This is also a mechanism that exists in numerous other states, including Connecticut, Iowa, and North Carolina. Number 1038 CHAIR WEYHRAUCH, reading an excerpt from a comparison by amendment of the original bill version and the proposed committee substitute [included in the committee packet], spoke as follows: It says, "the attorney general participates in an adjudicatory proceeding before the commission". If the commission makes a final determination and the attorney general believes it's in the best interest of the public to proceed in superior court, either as an appellant or as party to a proceeding that goes to superior court, can the same costs be passed through? Because this doesn't allow it - it only says "before the commission", not before a superior court. MR. O'TIERNEY answered that's correct. He said, "It anticipates that that being the fact finding forum, ... anything beyond that would be in an appellate context and would simply be a challenge to some of the findings of fact or the conclusions of law, but it wouldn't be, basically, relitigated." CHAIR WEYHRAUCH suggested that the issue could be discussed further at the next hearing of HB 520. [HB 520 was heard and held.]
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