Legislature(2007 - 2008)BELTZ 211

03/01/2007 04:00 PM Senate COMMUNITY & REGIONAL AFFAIRS


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04:07:06 PM Start
04:09:59 PM SB16
04:53:13 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 16 EXTEND REGULATORY COMMISSION OF ALASKA TELECONFERENCED
Moved CSSB 16(CRA) Out of Committee
Bills Previously Heard/Scheduled
         SB  16-EXTEND REGULATORY COMMISSION OF ALASKA                                                                      
                                                                                                                              
CHAIR OLSON announced the consideration of SB 16.                                                                               
                                                                                                                                
SENATOR WAGONER moved the committee substitute (CS) of SB 16,                                                                   
labeled, 25-LS0148\E, Kane. Hearing no objections, Version E was                                                                
before the committee.                                                                                                           
                                                                                                                                
SENATOR GENE  THERRIAULT, Alaska  State Legislature, said  the new                                                              
language for  SB 16 requests a  two-year review of  the Regulatory                                                              
Commission of Alaska  (RCA) by the Division of  Legislative Audit.                                                              
It would  not be a full  audit as is done  prior to a  sunset, but                                                              
it  would provide  a  report card  as  to how  the  RCA is  moving                                                              
dockets through  the system, meeting deadlines, and  other aspects                                                              
of  efficiency.  In  Section  4, the  initial  bill  suggested  an                                                              
eight-year  extension, and there  was some  concern that  that was                                                              
too  long, so  it  was changed  to  six years.  He  said the  bill                                                              
should remove the committee's concerns from the last meeting.                                                                   
                                                                                                                                
4:09:59 PM                                                                                                                    
SENATOR STEVENS asked about the six-year extension.                                                                             
                                                                                                                                
SENATOR THERRIAULT  said because of  the two-year report  card, he                                                              
wanted the extension to be divisible by two.                                                                                    
                                                                                                                                
4:10:54 PM                                                                                                                    
CHAIR OLSON asked about the fiscal note change.                                                                                 
                                                                                                                                
SENATOR  THERRIAULT said  he doubted  it would  change the  fiscal                                                              
note, because  the "audit  shop" is  already budgeted  for ongoing                                                              
operations of the legislature.                                                                                                  
                                                                                                                                
KATE GIARD,  Chair, Regulatory Commission  of Alaska, said  the CS                                                              
will provide stability for the RCA and for the state. The two-                                                                  
year audits  are wise and responsible,  and it will make  sure the                                                              
RCA keeps on  track. She handed  out the RCA annual report  to the                                                              
committee, which  includes the number of statutory  extensions the                                                              
RCA authorized. They  can either be at the request  of the parties                                                              
or by RCA's  authority, which allows a one-time  90-day extension.                                                              
Parties and the  RCA have extended for various  reasons, she said.                                                              
The  information is  reported to  legislative auditors  quarterly.                                                              
She said page 75 of the report speaks to commission proceedings.                                                                
                                                                                                                                
4:14:37 PM                                                                                                                    
MS. GIARD  said there are  substantive, final  decisions-generally                                                              
after a rate case  or at the very end of the  matter; substantive,                                                              
non-final  decisions,  which  occur  when  parties  disagree;  and                                                              
procedural  decisions, which  the administrative  law judges  make                                                              
or the RCA  affirms. The report  lists the number of  dockets, she                                                              
stated, and it shows  what is pending, how many cases  came to the                                                              
RCA, how many were closed, and how many remain.                                                                                 
                                                                                                                                
SENATOR  WAGONER asked  why  there  are a  high  number of  letter                                                              
orders issued in FY05.                                                                                                          
                                                                                                                                
MS. GIARD  said letter  orders are documents  issued by  RCA staff                                                              
and are  related to the  number of applications.  They can  be for                                                              
incomplete applications  or other correspondence. The  RCA focuses                                                              
on adjudicatory decisions and not letter orders, she said.                                                                      
                                                                                                                                
4:16:49 PM                                                                                                                    
MS. GIARD  said the  report shows  appealed cases.  Page 54  lists                                                              
the appeals, and  it is a bit overwhelming because  they take up a                                                              
number of  pages. Most are  individual appeals of  the Transalaska                                                              
Pipeline  System  (TAPS)  owners,   who  individually  appeal  RCA                                                              
orders on  a case by  case basis. Sometimes  they are  appealed to                                                              
the  Superior  Court  and  then  the  Supreme  Court,  she  noted.                                                              
Quality  bank has  been  appealed  since 1986,  so  those are  all                                                              
matters that  are continuing to  go through. For  utility matters,                                                              
there is  a description of  what the appeals  were about.  She can                                                              
provide  more information  on the  appeals. The  report shows  how                                                              
many utilities are  certificated to give the committee  an idea of                                                              
what  the RCA  does.  It is  broken down  between  those that  are                                                              
economically regulated,  where the RCA  sets the rates,  and those                                                              
that  are exempt  from  economic regulation  but  needing to  meet                                                              
safety, service  area, and other  standards. Ms. Giard  added that                                                              
the  report has  details  on telecommunication  competitive  entry                                                              
and markets.                                                                                                                    
                                                                                                                                
4:19:45 PM                                                                                                                    
SENATOR THOMAS  asked for an example  of what the RCA  would do if                                                              
it wasn't regulating an entity's economics.                                                                                     
                                                                                                                                
MS.  GIARD  said  the  RCA  may  regulate  service  areas,  safety                                                              
requirements,  or the  overall management.  For  example, the  RCA                                                              
has jurisdiction  over Aurora  [Energy],  but it doesn't  regulate                                                              
rate changes.                                                                                                                   
                                                                                                                                
4:21:20 PM                                                                                                                    
SENATOR STEVENS  asked about  the previously  discussed topics  of                                                              
qualifications and  salaries of the commissioners,  adding a chief                                                              
of staff, and changing the deadlines for rate cases.                                                                            
                                                                                                                                
MS. GIARD  said she  provided a  copy of  the statutory  revisions                                                              
that  the RCA  is  recommending  to the  governor,  who will  come                                                              
forward with legislation.  The changes that the  RCA proposes are:                                                              
increase the  regulatory cost-charge limit  from seven to  nine in                                                              
order to  fund the PERS liability  that the RCA absorbed  in 2008;                                                              
increase civil  penalties from $100 to  up to $1,000; adopt  a 12-                                                              
month  timeline for  anything that  does not  have a timeline  (as                                                              
recommended  by  the utilities);  [adding]  an office  of  general                                                              
counsel-"we've talked  to you about the relationship  that the RCA                                                              
has with  the Attorney  General coming before  us and  also acting                                                              
in adjudication  with us";  add an  administrative law  section to                                                              
make  the   RCA  distinct  from   the  Office  of   Administrative                                                              
Hearings; put  in a  natural gas and  oil pipeline section;  allow                                                              
the  RCA   access  to   certain  personnel,   like  an   executive                                                              
secretary, and; update commissioner qualifications and salaries.                                                                
                                                                                                                                
4:26:42 PM                                                                                                                    
SENATOR WAGONER  said Bill  Gates couldn't  become a  commissioner                                                              
based on the proposed qualifications.                                                                                           
                                                                                                                                
MS.  GIARD  said he  could  because  he  has had  executive  level                                                              
experience for a period of five years.                                                                                          
                                                                                                                                
SENATOR WAGONER said  the wording uses "and," so it  might need to                                                              
be reworded.                                                                                                                    
                                                                                                                                
4:27:56 PM                                                                                                                    
CHAIR OLSON  said his office has  had a number of  calls regarding                                                              
the proposed  statutory changes,  and he asked Senator  Therriault                                                              
for his opinion on those.                                                                                                       
                                                                                                                                
SENATOR THERRIAULT  said he just received the  document, and there                                                              
are companies  in the regulatory  community that have not  seen it                                                              
and may have suggestions.                                                                                                       
                                                                                                                                
4:29:23 PM                                                                                                                    
CHAIR OLSON asked  if a utility can opt out of  being economically                                                              
regulated.                                                                                                                      
                                                                                                                                
MS.  GIARD said  any  utility can  come  to the  RCA  and seek  an                                                              
exemption   from  regulations.   They  can   petition  to   become                                                              
regulated or to  become unregulated--like the  cooperatives. There                                                              
may  currently  be   an  application  from  Alaska   Waste  to  be                                                              
deregulated for  commercial activities.  Then the public  advocate                                                              
weighs in,  and then  there will  be a hearing  and a  decision on                                                              
the matter. But no pipeline carrier has that option, she said.                                                                  
                                                                                                                                
4:31:22 PM                                                                                                                    
CHAIR OLSON  asked, "If an  entity has  an adverse ruling  by your                                                              
commission, can they opt out of that then?"                                                                                     
                                                                                                                                
MS. GIARD said  no one can opt  out, but anyone can  petition. The                                                              
RCA  may  say  no,   but  then  they  will  likely   come  to  the                                                              
legislature.                                                                                                                    
                                                                                                                                
CHAIR OLSON asked how many entities have been exempted.                                                                         
                                                                                                                                
MS. GIARD  said several  cooperatives have  had elections  to come                                                              
out from underneath  regulation, including the utility  in Kodiak.                                                              
All  cooperative  electric utilities  have  the option  of  having                                                              
their members vote them out from regulation.                                                                                    
                                                                                                                                
4:33:06 PM                                                                                                                    
PAT LUBY, Advocacy  Director, AARP-Alaska, encouraged  the passage                                                              
of  SB  16  to  extend  the RCA,  which  has  been  a  referee  in                                                              
telecommunication  wars and has  oversight on all  utility issues.                                                              
The  RCA is  the consumer  watchdog  and the  only thing  standing                                                              
between the customers  and all the utility companies.  It is there                                                              
to  review every  rate case  to determine  if it  is justified  or                                                              
excessive.  This morning,  Mr. Luby  heard  an assistant  attorney                                                              
general  and an  RCA  attorney argue  a water  case  on behalf  of                                                              
Anchorage customers. All Alaskan families need the RCA, he said.                                                                
                                                                                                                                
4:34:29 PM                                                                                                                    
PAT  DAVIDSON,  Division of  Legislative  Audit,  said  the CS  is                                                              
clear, and  the two-year audit  is not  complex. It puts  the onus                                                              
on the commission  to do the work and she would  simply verify it.                                                              
In response to  Chair Olson's question about the  fiscal note, she                                                              
said about  60 percent of her  workload is statutorily  driven and                                                              
40 percent  comes from  audit requests  approved by committee.  SB
16 will  only move the  RCA audit ahead  of the requested  audits.                                                              
The  audit  will  just  go  in with  the  rest  of  her  work  and                                                              
typically won't have a fiscal note with it.                                                                                     
                                                                                                                                
CHAIR OLSON said, "So no addition during finance committee?"                                                                    
                                                                                                                                
MS. DAVIDSON said,  "If you like the level of  audit services that                                                              
you're getting  right now,  then we'll  just be  coming in  with a                                                              
maintenance budget."                                                                                                            
                                                                                                                                
4:37:10 PM                                                                                                                    
FRANK CORBIN,  General Manager, Nushagak Cooperative,  Dillingham,                                                              
said  the  cooperative  has  electric,  telephone,  cable  TV  and                                                              
internet, and  it is exempt from  the RCA [rate]  regulations, but                                                              
it still  files reports and  is subject  to the RCA.  He expressed                                                              
support   for  the   bill.  As   a  business   person,  he   feels                                                              
qualifications  should be  minimal, because  raising the  bar will                                                              
exclude  people.  He fears  creating  an  elite social  club  that                                                              
nobody  can   get  into.   Steeper  qualifications   might  affect                                                              
legislative vigilance.  He supports  an increase in  salary, which                                                              
will  attract higher-quality  applicants.  He  said,  "I do  agree                                                              
with  the concept  of  having  a  former utility  executive  being                                                              
available for commission  positions in light of the  number of ex-                                                              
commissioners that have gone to work in the utility industry."                                                                  
                                                                                                                                
4:40:43 PM                                                                                                                    
MR. CORBIN  said competition is  the buzz word everywhere,  and it                                                              
is nothing  new in a capitalist  country. A social construct  of a                                                              
safety net  has developed out  of competition. "The  economic fact                                                              
is  that there  is  some point  upon  which competition  does  not                                                              
address…;  individuals  within our  society  have  agreed to  this                                                              
point  that   that's  a   social  responsibility  that   different                                                              
government entities  take upon themselves  to address  those areas                                                              
where  competition  is not  the  answer."  That tipping  point  is                                                              
evident  even in  the  cooperatives that  have  exempted out  from                                                              
under  regulation, he  said. It  is a financial  burden and  those                                                              
cooperatives  have  decided  that  there  is no  return  on  their                                                              
investments.  He continued, "Depending  on which  side of  the net                                                              
you're  on, it's  either a  ceiling or  a floor.  It exists.  It's                                                              
real and it's economic,  and I ask for consideration  of that." He                                                              
noted that  the Nushagak  cooperative was  involved in  protesting                                                              
the Yukon-Crowley  merger, and he observed testimony  of the state                                                              
attorney general  who said the monopoly  in the region  was a good                                                              
thing for the state because it was more efficient.                                                                              
                                                                                                                                
4:43:53 PM                                                                                                                    
MR.  CORBIN  said, "We  were  assured  that  there was  still  the                                                              
semblance  of  competition  because, for  example,  Delta  Western                                                              
could  lease space  from Crowley  in Bethel,  and therefore  there                                                              
would   be  two   fuel  resellers   in  Bethel."   When  a   Delta                                                              
representative  was questioned  about  that business  arrangement,                                                              
he said  it didn't  matter how  much Crowley  charged him  because                                                              
the profits  in Bethel  were so  deep. He said  that is  a serious                                                              
issue for the bush.                                                                                                             
                                                                                                                                
CHAIR OLSON  asked if he wants the  RCA to look at  fuel retailers                                                              
for  regulation,  as it  was  under  the Alaska  Public  Utilities                                                              
Commission (APUC).                                                                                                              
                                                                                                                                
MR. CORBIN  said, "We  would like  some relief  out there  in some                                                              
form, and  we have asked  everywhere." He  has been told  that the                                                              
RCA is the answer, but when he gets there he is told it is not.                                                                 
                                                                                                                                
4:45:35 PM                                                                                                                    
BRAD  REEVE, General  Manager, Kotzebue  Electric Association  and                                                              
President  of  the  Alaska Power  Association,  said  his  utility                                                              
deregulated economically  from the  RCA in 1993.  His role  in the                                                              
trade association  puts him in contact  with the RCA.  Under Chair                                                              
Giard things  are improving,  and he said  his concerns  have been                                                              
listened to.  He said  he is seeing  more transparency  and things                                                              
have  been  more   pleasant.  When  his  association   decided  to                                                              
deregulate in  1993, it was  very expensive--all hearings  were in                                                              
Anchorage--and   the  members   felt  they   had  no  voice.   The                                                              
relationship  has greatly  improved over  the past  few years,  he                                                              
concluded.                                                                                                                      
                                                                                                                                
CHAIR   OLSON  asked   about  the   financial   burden  on   small                                                              
cooperatives.                                                                                                                   
                                                                                                                                
4:48:27 PM                                                                                                                    
MR. REEVE  said when his association  was regulated a  rate filing                                                              
could  run from  $40,000  to $80,000,  and  members were  excluded                                                              
from any  input. The  members voted  to deregulate,  and it  works                                                              
well.  There  are  still  safety   regulations,  and  the  RCA  is                                                              
involved in power cost equalization, he explained.                                                                              
                                                                                                                                
CHAIR OLSON asked if he has seen the proposed statutory changes.                                                                
                                                                                                                                
MR. REEVE said his attorney said they are acceptable.                                                                           
                                                                                                                                
SENATOR THOMAS asked how the association raises its rates.                                                                      
                                                                                                                                
4:50:21 PM                                                                                                                    
MR. REEVE  said two  public hearings  are held,  and the  board of                                                              
directors acts  as an  adjudicator. Mr. Reeve  presents a  case to                                                              
the board and  allows members to  attend. "Then I have  to build a                                                              
case along with  the auditor and other professional  staff…to make                                                              
the case that we need an increase."                                                                                             
                                                                                                                                
SENATOR THERRIAULT  said the CS  is reasonable for  the extension,                                                              
and he  noted that he  has been told  by the power  companies that                                                              
the  RCA  is  so   much  better  than  years  ago,   and  that  is                                                              
gratifying. Clearly  the legislature doesn't  want to take  on the                                                              
duties of  the RCA, he said,  and the 6-year extension  and 2-year                                                              
report card is  reasonable. The proposed changes  can be discussed                                                              
with the  administration, and perhaps  an independent bill  can be                                                              
drafted to put these ideas on the table.                                                                                        
                                                                                                                                
SENATOR  WAGONER moved  the  CS for  SB 16,  labeled  25-LS0148\E,                                                              
from committee  with individual  recommendations and  accompanying                                                              
fiscal notes.  Hearing no  objections, CSSB  16(CRA) moved  out of                                                              
committee.                                                                                                                      

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