Legislature(2001 - 2002)
03/20/2002 01:44 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SB 324-MUNICIPAL PUB.UTIL.COMPETING W/TELECOM MR. JIM VOTEBERG, assistant city manager of the City of Ketchikan and the assistant general manager of Ketchikan Public Utilities (KPU), stated support for SB 324. He provided the following highlights of the written testimony he submitted to committee members. The City of Ketchikan, and the City of Ketchikan doing business as Ketchikan Public Utilities, owns and operates several utilities including telecommunications, electric, water, wastewater collection and treatment, and solid waste collection and disposal. This legislation is a local issue and important to the city because it allows the city to operate its utilities in a cost-effective manner, as it has for over 50 years and it provides local leaders with an important tool for the economic development of our community. Should the city become regulated under the RCA, the cost to the ratepayers in Ketchikan is estimated at around $700,000 annually, which does not include the cost of a rate study that, for each utility, could be in the range of $250,000. These costs include annual fees, [indisc.], additional staff time to perform the increased workload of a fully regulated utility, and costs associated with changes in the city's existing accounting system. These costs would be directly passed on to our consumers resulting in a higher utilities bill. Given the economic situation in Ketchikan, this is not the time to increase costs to its residents and businesses. The city is aware that AP&T opposes this legislation and has questioned its need by pointing out that the RCA currently has regulations in place to grant a waiver to Ketchikan. Although a procedure may exist, the procedure can be time consuming and expensive, particularly when a company opposes the waiver and there's no guarantee that a request will be granted. Given that AP&T testified before the Senate Labor & Commerce Committee that it would oppose any request by KPU for a waiver from the RCA. The cost to file a waiver will be high, it will take a long time and, again, there's no guarantee of the outcome. Through correspondence dated March 5, 2002, RCA Chairperson Nan Thompson addresses SB 324 by stating, 'The RCA has not taken a position in support or in opposition to this legislation. We believe it presents policy issues that are within the legislators' province.' The city agrees that this legislation is a policy issue within the legislative jurisdiction and is seeking resolution through the legislative process. Given the advancement of telecommunication technology and varying levels of regulations placed on telecommunications companies, the proposed legislation creates a level playing field. Without this legislation, for example, should a cable company such as GCI use its cable plants to provide telephone service in Ketchikan, GCI would be non-regulated while Ketchikan would be fully regulated. If a wireless company, such as AP&T, were to compete in Ketchikan, AP&T would be lightly regulated while Ketchikan would be fully regulated. In any case, an uneven playing field is created by Ketchikan becoming fully rate- regulated and trying to compete against a non-regulated or a lightly regulated entity. Maintaining its non- regulated status allows Ketchikan to compete on a level surface. In closing, I'd like to stress the importance of this relatively small change to AS 42.05.711(b)(2) in the community of Ketchikan. This is a local issue. SB 324 has been narrowly crafted to simply address the uneven playing field facing the City of Ketchikan and point out that it does not affect other municipalities throughout the state. The city looks to the state to preserve local control over its utility as it has had for over 50 years and ensure that local government retains the tool it needs to better serve our community and assist in turning Ketchikan's economy around. Thank you and that's all I have. VICE-CHAIR DONLEY asked Mr. Voteberg to explain why SB 324 will not apply to other communities with a municipally owned utility in competition with a privately owned utility. MR. VOTEBERG said that Ketchikan has the only municipally-owned telephone company in the state therefore it is the only municipally-owned company that would be in competition with another telephone company. VICE-CHAIR DONLEY noted SB 324 applies to both electric operating entities and telephone companies. MR. VOTEBERG deferred to Heather Graham, counsel for the City of Ketchikan. MR. VAN ABBOTT, Ketchikan Public Utilities, said one answer he would pose to Senator Donley's question is that, hypothetically, if an electric company wanted to get into the telephone business and compete with a telephone company, it would have to get a certificate of public convenience, which involves a lengthy process. Whether it would be regulated or not would be in the bounds of the due diligence the RCA would take before issuing the certificate. VICE-CHAIR DONLEY asked Ms. Graham if the answer to his question is that although language on page 2 covers a utility or an electric operating entity, it only applies if that entity is competing with a telecommunications utility and not with another electric operating entity. MS. HEATHER GRAHAM, counsel to the City of Ketchikan, said that is exactly right. She noted she would be available to answer any future questions should they arise. MR. JIMMY JACKSON, attorney for GCI, clarified the earlier statement by a representative from Ketchikan that GCI would be unregulated if it was to compete with KPU in the local phone business is incorrect, and that GCI takes no position on the bill. MR. PHILLIP TREUER, RCA staff, stated the RCA neither opposes nor supports SB 324. MR. MIKE GARRETT, President of AP&T Wireless, a subsidiary of Alaska Power and Telephone, said that AP&T Wireless opposes SB 324 and is uncertain why it is before the committee. He believes it is special interest legislation for KPU that provides relief for that one entity and addresses an issue for which an administrative solution exists. KPU could file a waiver with the RCA and, in doing so, have to prove that the facts behind its estimates are true and correct and in the public's interest. If so, the waiver would be approved. He said it is strange to AP&T that KPU would take legislative action rather than administrative action. In response to Mr. Voteberg's statement that AP&T would oppose a waiver application by KPU, MR. GARRETT said AP&T would not oppose an application that is in the public interest. AP&T would reserve the right to comment if KPU filed a waiver. He noted that the law, as written now, adheres to the Telecom Act of 1996, particularly Section 254(k). AP&T's interpretation of that section is that unregulated services cannot be subsidized with regulated services. AP&T has regulated utility operations. As a wireless carrier providing services in Ketchikan, it would not necessarily be rate regulated, but it would have to provide [indisc.] to the Commission just like any other competitive local telephone company. Its regulated services, power, telephone and hydroelectric, are regulated: AP&T provides the information requested by the RCA and does not find it to be burdensome. MR. GARRETT said the existing law has worked well in the past. The law was put in place when Anchorage and Fairbanks had city- owned utilities. They were able to get waivers from this rule as they were able to prove that waivers were appropriate. He noted that AP&T is uncertain how SB 324 will affect other city-owned electric utilities that may want to compete in telecommunication services. 2:30 p.m. There being no further testimony, VICE-CHAIR DONLEY noted the committee did not have a quorum at this time. He then announced a short recess. TAPE 02-10, SIDE B VICE-CHAIR DONLEY called the meeting back to order and announced the committee would take up HB 362. Senator Therriault had arrived.