Legislature(2001 - 2002)

03/20/2002 01:44 PM JUD

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

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