Legislature(2001 - 2002)

02/21/2001 01:38 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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.                                                                 

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