Legislature(2001 - 2002)
02/21/2001 01:38 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 84-PUBLIC UTILITY JOINT ACTION AGENCIES SENATOR COWDERY moved to adopt CSSB 84 (JUD), version 22-LS0504\J, Cramer, as a working draft. There being no objection, the motion carried. MR. MICHAEL SCHRADER said he was with the law firm Ater Wynne, which represents the Four Dam Pool Project Management Committee. The Four Dam Pool purchasing utilities were authorized by legislation last year to purchase Four Dam Pool projects from Alaska. The vehicle to purchase the projects is a Joint Action Agency (JAA), which was authorized under prior Alaska law. There was a supplement to the statute allowing formation of a special purpose JAA that is the entity that will be purchasing the Four Dam Pool projects. In the process of forming JAA, the five member utilities ran into a number of issues in terms of the negotiation of the JAA agreement - the document that creates this entity and a number of technical issues. Some of the issues were resolved just by the terms and negotiations of the agreement - others were resolved by either federal or state law. MR. SCHRADER said SB 84 would address a number of these issues, resolve them and allow the divestiture of the Four Dam utilities to go forward. Being a tax-exempt entity, both state and federal, is a key factor for JAA and for the economics of divestiture. It is essential for the purchasing utilities that JAA be characterized as a governmental unit, exempt from restrictions of federal tax law. A key factor in having that governmental status is eminent domain or condemnation powers that are granted to JAA. SB 84 makes an amendment to existing law providing JAA expanded eminent domain or condemnation powers, subject to significant limitations but with a sufficient grant of power to assist in its application to the Internal Revenue Service. Number 300 CHAIRMAN TAYLOR said the first four sections of the work draft are existing law; the only change is to add a new section entitled (o). Sections 6 and 9 cover eminent domain, tax exemption, and make JAA a governmental body. MR. SCHRADER agreed that the federal and state issues are addressed in these sections. Another issue that arose when going through the formation of JAA had to do with JAA's status as a regulated entity by the Regulatory Commission of Alaska (RCA). Currently, four of the five member utilities are exempt from regulation by the RCA. The power sales agreement is also exempt from review and approval by RCA. There was a disconnect between the provision in Title 42, the RCA provision, in terms of the regulatory status of JAA. On one hand there were provisions that said the power sales agreement is exempt from review and approval by the RCA but on the other hand there was not a provision covering the other aspects of regulation by the RCA. SB 84 that creates consistency in terms of the regulatory status of JAA - this has been reviewed and approved. As long as JAA has outstanding indebtedness to the state, in connection with the acquisition of the projects, JAA would be exempt from regulation by the RCA. When the indebtedness is paid in full, JAA becomes subject to regulation under existing provisions of statute. Number 503 SENATOR COWDERY asked if SB 84 addresses Kodiak. MR. SCHRADER said SB 84 does not address the regulatory status of the underlying member utilities. Of the five purchasing utilities only the Kodiak Electric Association is a regulated utility. SB 84 says the organization that is formed is exempt. MR. SCHRADER noted another concern arose about the pass-through liability of JAA. It is essential to the member utilities that JAA operate as a separate and distinct legal entity. This is provided for in statute, but the concern is that any claims or liabilities of JAA would be passed-through to the member utilities. The member utilities obligations to JAA are defined by the power sales agreement, a long-term agreement that has been in place and will continue to be in place following the divestiture transaction. Additional language in SB 84 makes absolutely clear that there is no pass-through liability - a claim against JAA cannot be asserted as a claim against the member utilities. This is referred to in sections 6 and 13. Number 631 CHAIRMAN TAYLOR said if these sections had not been added to SB 84, communities could have assumed large liabilities, which would have prevented the project from coming together. MR. SCHRADER said this was a key factor in forming SB 84. Number 776 MR. BRIAN BJORKQUIST, Attorney General with the Department of Law (DOL) in Anchorage, said his primary client agency is the Alaska Energy Authority. In working with attorneys and the Four Dam Pool utilities on SB 84, DOL's concern with the previous version have been worked through and addressed. DOL supports CSSB 84 and will continue to work with the utilities and their attorneys as the process goes forward. SENATOR COWDERY moved CSSB 84 (JUD) from committee with individual recommendations. There being no objection, the motion carried.