Legislature(1995 - 1996)

05/04/1995 02:45 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
  CS FOR HOUSE BILL NO. 17(L&C) am                                             
                                                                               
       An Act expanding the services that may be offered by an                 
       electric cooperative to include sewer and water and gas                 
       services when authorized by the Alaska Public Utilities                 
       Commission, and to include direct satellite  television                 
       services;  relating  to  officers  of  a  telephone  or                 
       electric  cooperative;  relating  to  amendment of  the                 
       articles of incorporation  of a  telephone or  electric                 
       cooperative; and providing for an effective date.                       
                                                                               
  Co-chairman Halford directed that CSHB 17 (L&C)am be brought                 
  on for consideration.   JEFF  LOGAN, aide to  Representative                 
  Green, came before  committee.  He  explained that the  bill                 
  amends Title 10 in three categories:                                         
                                                                               
       1.   Expansion of  the scope  of services  that can  be                 
  offered        by electrical cooperatives to  include water,                 
                 sewer,  natural  gas,  and  direct  satellite                 
                 television.                                                   
                                                                               
       2.   Clarification of voting procedures  for amendments                 
  to        articles   of    incorporation   for    electrical                 
            cooperatives.  New language clarifies how  members                 
            may vote either at the  annual meeting or by mail.                 
                                                                               
                                                                               
       3.   Provision  of  a local  option  in the  titling of                 
                                                                               
                                                                               
  board          members  of  electric  cooperatives.    Under                 
                 current law, board members are required to be                 
                 titled:         president,    vice-president,                 
                 secretary, and treasurer.  Common practice is                 
                 for the presiding  officer of  a board to  be                 
                 called the  chairman.  Some  cooperatives use                 
                 other titles.  Proposed changes allow them to                 
                 select the titles they wish to use.                           
                                                                               
  Remaining  sections, with  the  exception  of the  effective                 
  date, are conforming changes.                                                
                                                                               
  Mr. Logan next directed attention to a draft SCS CSHB 17 and                 
  voiced  support,  on  behalf of  the  sponsor,  for amending                 
  language  therein.   Changes incorporated  within  the draft                 
  include:                                                                     
                                                                               
       Page 2,  line 1,  removes inclusion  of subsection  (7)                 
  from the  citation of  AS 10,25.020  (6) since  there is  no                 
            need to include direct satellite television  under                 
            APUC regulation.                                                   
                                                                               
       Page  2,  line  25,  subsection  (6)   utilizes  Senate                 
       language which is cleaner.                                              
                                                                               
       Page  2,  line  28, subsection  (7)  makes  clear where                 
  direct    satellite television  services may be  offered and                 
            where  they  may   not.     It  also  provides   a                 
            definition.                                                        
                                                                               
  Senator Randy Phillips voiced his understanding that the REA                 
  has changed to the RUS (Rural  Utility Services) in order to                 
  obtain loans  for provision of  other utilities.   Mr. Logan                 
  concurred.  The  Senator then asked  if there was  objection                 
  from  gas, water, and sewer companies  to expansion of rural                 
  electrical  cooperatives to  other  utilities.    Mr.  Logan                 
  responded  negatively.    Co-chairman   Halford  voiced  his                 
  understanding  that  water,  sewer,  and  gas  services  are                 
  provided through a system but not certified  or regulated by                 
  APUC.                                                                        
                                                                               
  Co-chairman Frank voiced  his understanding  that it is  not                 
  anticipated that rural electrical  coop provision of  water,                 
  sewer, or gas  services would  overlap areas where  existing                 
  utilities provide these  services.   The proposed bill  will                 
  only  apply  to areas  where  there  in  presently  no  such                 
  service.  Mr. Logan  agreed that it  is not the intent  that                 
  service areas overlap.                                                       
                                                                               
  DAVE   HUTCHENS,   Alaska    Rural   Electric    Cooperative                 
  Association, next  came  before committee.    As  background                 
  information he  explained that the proposed  bill represents                 
  the  first  amendment to  AS  10.25, the  electric telephone                 
  cooperative  act, since the 1988 code revision.  It contains                 
                                                                               
                                                                               
  a collection  of needed  items due  to a  change in  present                 
  circumstances or the  fact that  some items were  overlooked                 
  when revision occurred.                                                      
                                                                               
  Speaking to  concern raised by Senator  Phillips questioning                 
  electric coop expertise in other utility areas, Mr. Hutchens                 
  explained that "this  section does not  confer the right  on                 
  the  electric  cooperatives  to  go  out  and  provide  this                 
  service."   It merely  places provision  of services  within                 
  their corporate powers.   It would then be legal for them to                 
  engage in this business, if authorized to do so by the APUC.                 
                                                                               
                                                                               
  Speaking  to the  change  from  REA  to  RUS,  Mr.  Hutchens                 
  referenced combination  of all  rural utility loan  programs                 
  within the Dept. of Agriculture into one entity.  The reason                 
  for the change was to allow electric cooperatives  that have                 
  a  good track record  of management success  to extend sewer                 
  and water  in rural areas where needed.   For loans to rural                 
  entities for small sewer and water  systems that do not have                 
  a  good  management record,  the  proposed bill  would allow                 
  rural  electric  coops  to step  in  and  provide management                 
  services, where necessary, to protect assets built with USDA                 
  loans.  That is the national push behind the issue.                          
                                                                               
  In response to concern raised by Senator Phillips, asking if                 
  a rural  cooperative  could take  over  gas services.    Mr.                 
  Hutchens replied, "Absolutely  not."   The rural coop  would                 
  have to go before the APUC  and make a case that they  could                 
  do  the  job  better  than  Enstar.    He  then  voiced  his                 
  understanding there is no chance they could do that.                         
                                                                               
  Senator  Rieger asked  if  certificates  of convenience  and                 
  necessity are always exclusive.   Mr. Hutchens answered, "In                 
  practice,  it has  been  . .  . for  sewer, water,  gas, and                 
  electric."  Local telephone service  has also been exclusive                 
  in practice.                                                                 
                                                                               
  Responding to an additional question from Senator  Phillips,                 
  Mr. Hutchens explained  that RUS  provides ready funding  to                 
  rural electric coops for water and sewer projects.  There is                 
  $900 million in the federal budget for this year.                            
                                                                               
  Senator Phillips again posed a question regarding expertise.                 
  Mr. Hutchens  pointed  to common  practice  in a  number  of                 
  states for the  electric cooperative  to also provide  sewer                 
  and  water service.    The management  system  is in  place.                 
  Specific expertise in sewer and water is then hired.                         
                                                                               
  Noting  that the  Dept.  of  Environmental  Conservation  is                 
  attempting to construct sewer and water projects in a number                 
  of  areas,  Co-chairman  Frank asked  if  cooperatives  were                 
  working with the department.  He suggested that  coops could                 
  provide both  management and maintenance expertise  that was                 
                                                                               
                                                                               
  lacking in the past.                                                         
                                                                               
  Senator  Sharp  suggested  that for  small  water  and sewer                 
  utilities that  are now  precluded  from selling  out to  an                 
  existing electric cooperative if  they chose to "get out  of                 
  the business," the  proposed bill offers an  opportunity for                 
  improvement of service  by an entity with  greater financial                 
  capabilities.                                                                
                                                                               
  Mr. Hutchens stressed that in Alaska cooperative members are                 
  not "hungry after the idea of getting into sewer and water."                 
  Members feel it  is good to have  authority to do so  if the                 
  right  opportunity comes  along, or it  makes sense  for the                 
  coop to do  so.  Mr.  Hutchens acknowledged that the  Alaska                 
  Village Electric Cooperative which  services 50 villages  in                 
  the western part of the state is willing to take on whatever                 
  services might be  necessary to make their  communities more                 
  viable.  Naknek Electric is also interested in being able to                 
  provide sufficient natural gas for local service.                            
                                                                               
  Senator Sharp MOVED for adoption of SCS CSHB 17 (9-LS0096\W,                 
  Cramer,  4/26/95).    Senator Rieger  OBJECTED  and inquired                 
  concerning the difference between Senate and House versions,                 
  specifically referencing new language at page 2, relating to                 
  direct  satellite  television.    Mr.  Logan  explained that                 
  satellite television differs from  cable in that programming                 
  is  received by a satellite dish and  relayed to users.  The                 
  utility would not  offer the  service itself.   Cooperatives                 
  would   "service"   the   service.     They   would  provide                 
  administrative and  billing  services.   Mr. Hutchens  added                 
  that the  National Rural  Telecommunications Cooperative  is                 
  owned by a national collection of  coops.  NRTC has its  own                 
  programming package put together in direct negotiations with                 
  programmers such as Disney.                                                  
                                                                               
  Senator Rieger next questioned inclusion of the following:                   
                                                                               
       to  a  location  that  is  not  part  of  an  area                      
       certificated  by  the   Alaska  Public   Utilities                      
       Commission to  a cable  television company  on the                      
       effective date of this Act.                                             
                                                                               
  Mr. Hutchens explained that areas cooperatives would like to                 
  serve with direct satellite television  are "the scattered .                 
  . . housing areas  in their electric service areas."   As an                 
  example,  he  cited  areas in  the  Matanuska  Valley, Kenai                 
  Peninsula,  Copper  Valley,  and   rural  areas  outside  of                 
  Fairbanks  where  it  is  not  feasible  to   have  a  cable                 
  television system.   The foregoing was  added as a means  of                 
  assuring cable television companies that electric coops will                 
  not  be "poaching  their  territory."   Coops  would not  be                 
  serving  areas  that have  cable  television.   Mr. Hutchens                 
  acknowledged that the above does not forego direct satellite                 
  television  service  in  competition  with  cable  delivery.                 
                                                                               
                                                                               
  However,  that  would be  done  through "somebody  like RCA-                 
  Hughes" rather than by an electric coop.                                     
                                                                               
  End:      SFC-95, #61, Side 2                                                
  Begin:    SFC-95, #63, Side 1                                                
                                                                               
  In the course of further  discussion of satellite television                 
  delivery, Mr. Hutchens explained that the consumer would own                 
  his  or  her own  satellite  dish.   The  coop  would merely                 
  provide  billing  services.   Language  within  the  bill is                 
  intended to allow for provision of  service "if and when the                 
  satellite actually has Alaska in its footprint . . . .   Two                 
  years is  the projection on that."   Scattered housing would                 
  be the market  area.  The benefit of  coop provision of this                 
  service  rests  in the  value  added service  and negotiated                 
  rates on programming packages through NRTC.                                  
                                                                               
  Responding to a  question from Senator Rieger,  Mr. Hutchens                 
  advised  that homes  located in  an area  certificated  to a                 
  cable company,  would fall  outside the  area that  could be                 
  served through  a coop.  If the area  is not served by cable                 
  when the proposed bill becomes law,  it could be served by a                 
  cooperative.                                                                 
                                                                               
  Senator  Rieger  inquired  concerning  the  position  of the                 
  sponsor  on  the  proposed  amendment.   Jeff  Logan  voiced                 
  concern  regarding  passage   of  the  legislation   if  the                 
  amendment is incorporated.   He then expressed  a preference                 
  for the draft SCS CSHB  17 as written.  Senator Rieger  said                 
  he would not proceed  against the wishes of the  sponsor but                 
  expressed  concern over  backing  down  because a  regulated                 
  utility "doesn't want the competition."                                      
                                                                               
  Senator  Zharoff raised concern that in smaller communities,                 
  provision of television  services is  a private  enterprise.                 
  He  suggested  that service  by  a  utility  would limit  or                 
  prohibit service by the private sector.                                      
                                                                               
  In  response to a  further question  by Senator  Rieger, Mr.                 
  Hutchens explained  that the  cable television  industry was                 
  not convinced that language  passed in the House bill  would                 
  provide  sufficient  protection  against   competition  from                 
  satellite service.  New language contained within subsection                 
  (7) at  page  2  was  thus incorporated  within  the  Senate                 
  committee substitute.                                                        
                                                                               
  Senator  Rieger MOVED  to withdraw  his proposed  amendment.                 
  Co-chairman Frank  then  MOVED  for  adoption,  saying  that                 
  competition should be  allowed.   Regulation should only  be                 
  necessary  where competition  is  not  possible  because  of                 
  economic  reasons.    Senator  Sharp  voiced   concern  that                 
  competing services, regardless of technological advances, in                 
  a  small service  area  may dilute  the number  of customers                 
  needed for the service to be viable.  Senator Zharoff raised                 
                                                                               
                                                                               
  a question regarding reversal of services provided by a coop                 
  should a community  or private enterprise seek  to take over                 
  service  provision.   Co-chairman Frank  clarified that  the                 
  proposed amendment  would not grant  exclusivity to existing                 
  cable operators  relative  to  direct  satellite  television                 
  program services.  The change  would merely open competition                 
  to electric utilities that choose to provide the service.                    
                                                                               
  Co-chairman    Halford    raised   a    question   regarding                 
  certification of cable  television services, and  discussion                 
  of the issue followed.                                                       
  Senator  Sharp  expressed   concern  over  possible  unequal                 
  competition if one  segment of the industry  is certificated                 
  and  regulated  by  the APUC  while  the  other  is provided                 
  authority by the legislature, through statutes, and bypasses                 
  the regulatory process.                                                      
                                                                               
  Co-chairman Frank said that the  proposed amendment does not                 
  go as far  as he  would like.   He voiced  a preference  for                 
  allowing technology to  advance competition for  the benefit                 
  of the consumer.                                                             
                                                                               
  In response  to additional  questions regarding  regulation,                 
  Mr. Hutchens  advised that  cable television  companies that                 
  serve ten or  more customers are  to be certificated by  the                 
  APUC.    None of  the companies  are  regulated in  terms of                 
  rates,  unless consumers  petition for  economic regulation.                 
  The company in  Juneau is the  only regulated cable  service                 
  provider in Alaska.                                                          
                                                                               
  Co-chairman Frank cautioned  that it is  not good policy  to                 
  artificially  restrict  competition   where  technology   is                 
  allowing it to happen.   Senator Zharoff questioned allowing                 
  a utility to provide a service that  is not governed by APUC                 
  in possible competition with service  that has undergone the                 
  certification or regulatory process.                                         
                                                                               
  Co-chairman  Halford  voiced  his  understanding  that   the                 
  proposed bill merely allows utilities to engage in a form of                 
  competition that is presently available to any other entity,                 
  since provision of television services is unregulated.   The                 
  Co-chairman then  called for  objection to  adoption of  the                 
  proposed amendment.   No objection  having been raised,  the                 
  amendment was ADOPTED.                                                       
                                                                               
  In response to  a further question from Senator Zharoff, Mr.                 
  Hutchens explained that the bill  would simply grant utility                 
  cooperatives  authority  to   provide  needed  services  not                 
  provided by another entity.                                                  
                                                                               
  Senator Sharp MOVED  for passage of  SCS CSHB 17 (Fin)  with                 
  individual recommendations.   Senator  Zharoff OBJECTED  and                 
  advised of need for additional  review.  Co-chairman Halford                 
  called for a show of hands.  The motion carried on a vote of                 
                                                                               
                                                                               
  4 to 2.   SCS CSHB  17 (Fin) was  REPORTED OUT of  committee                 
  with  zero  fiscal notes  from  the  Dept. of  Commerce  and                 
  Economic  Development, one  from  the  Division of  Banking,                 
  Securities, and Corporations  and the other from  the Alaska                 
  Public Utilities Commission.   Co-chairmen Halford and Frank                 
  and  Senators  Phillips,   Rieger,  and  Sharp   signed  the                 
  committee report with a "do  pass" recommendation.  Senators                 
  Donley and Zharoff signed "no recommendation."                               
                                                                               

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