Legislature(2003 - 2004)

03/08/2004 08:07 AM STA

Audio Topic
* first hearing in first committee of referral
+ 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                                                                    
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                                                               
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                                                               
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                                                                    
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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