Legislature(2017 - 2018)BUTROVICH 205

03/20/2017 03:30 PM RESOURCES

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as
Download Video part 1. <- Right click and save file as

Audio Topic
03:29:41 PM Start
03:30:24 PM Confirmation Hearing: Big Game Commercial Services Board
03:47:25 PM SB58
04:07:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Consideration of Governor's Appointee: TELECONFERENCED
Big Game Commercial Services Board
- Henry Tiffany
-- Public Testimony on Appointee --
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
            SB  58-DEPT OF LAW: ADVOCACY BEFORE FERC                                                                        
3:47:25 PM                                                                                                                    
CHAIR  GIESSEL called  the meeting  back to  order and  announced                                                               
consideration of SB  58. She said this bill was  sponsored by the                                                               
Rules  Committee  at  the  request  of  the  governor,  with  the                                                               
Department of  Law (DOL) as  the bill  manager. She said  the DOL                                                               
has its  attorneys representing the  interests of  the consumers,                                                               
that  being the  Alaska public,  in proceedings  before both  the                                                               
Regulatory  Commission of  Alaska  (RCA) and  the Federal  Energy                                                               
Regulatory Commissioner  (FERC). How that representation  is paid                                                               
for and  will continue to  be paid in  the face of  lower general                                                               
fund amounts  is the subject  of this  bill. She welcomed  Mr. Ed                                                               
3:48:15 PM                                                                                                                    
ED SNIFFEN, Assistant Attorney General,  Department of Law (DOL),                                                               
presented SB 58.  As background, he said all  public utilities in                                                               
Alaska and pipelines that operate  in Alaska are regulated by the                                                               
RCA; they regulate  their rates, terms of service, and  a host of                                                               
other things.  To pay  for that  regulation, the  legislature has                                                               
established  a  regulatory cost  charge  that  is billed  to  the                                                               
utilities and the  pipelines, the entities that  benefit from the                                                               
regulation. It  is then  generally passed  on to  customers. That                                                               
money pays  for the  staff of  the RCA,  all their  analysts, and                                                               
administrative  functions of  regulating  the  utilities and  the                                                               
The Department of  Law has a role in that  process. It appears in                                                               
matters before  the RCA  to protect  the public's  interests. For                                                               
example, they  represent the ordinary  consumer to make  sure the                                                               
rates  are just  and reasonable  when Enstar  wants to  raise its                                                               
bill. The  department's efforts  are also  paid for  through that                                                               
same regulatory cost charge.                                                                                                    
3:49:54 PM                                                                                                                    
MR. SNIFFEN  said to  understand the  impact of  this bill  it is                                                               
important  to understand  what the  regulatory cost  charge does,                                                               
which is the subject of his presentation.                                                                                       
What is the regulatory cost charge (RCC)?                                                                                       
     The  RCC is  a  fee assessed  on  public utilities  and                                                                    
     pipelines   that  are   regulated  by   the  Regulatory                                                                    
     Commission  of  Alaska  (RCA).  It  is  created  by  AS                                                                    
     42.05.254 and AS 42.06.286.                                                                                                
Who Pays RCCs?                                                                                                                  
     Utilities and pipelines that are  regulated by the RCA,                                                                    
     including  over  125  public  utilities  and  about  20                                                                    
     common  carrier  pipelines  with  in-state  deliveries.                                                                    
     These utilities and pipelines may  pass the charge onto                                                                    
     customers that benefit from  RCA regulation. Each year,                                                                    
     the RCA assesses RCCs to  utilities and pipelines based                                                                    
     on  the  amount  of  work required  for  each  industry                                                                    
     sector.  For  example, if  they  are  spending most  of                                                                    
     their  time on  electric cases  one year,  the electric                                                                    
     utilities may pay  a little more. It is  based on where                                                                    
     their efforts are being focused.                                                                                           
3:51:21 PM                                                                                                                    
What does the RCC pay for?                                                                                                      
     The  money collected  in the  RCC provides  funding for                                                                    
     the  Regulatory Commission  of Alaska  (RCA), which  is                                                                    
     responsible  for  the  economic  regulation  of  public                                                                    
     utilities  and intrastate  common carrier  pipelines in                                                                    
     Alaska, and the Regulatory  Affairs and Public Advocacy                                                                    
     (RAPA)  section  in the  Department  of  Law, which  is                                                                    
     charged  with advocating  for  the  public interest  in                                                                    
     matters related  to the  economic regulation  of public                                                                    
     utilities and pipelines.                                                                                                   
The total  RCC is capped  by the  legislature at 0.87  percent of                                                               
the adjusted  gross revenue (derived  from operations  in Alaska)                                                               
of the regulated  utilities and pipelines. That  is split between                                                               
the RCA and  the DOL; 0.7 percent of the  adjusted gross revenues                                                               
are used  to pay the  RCA's budget and  0.17 percent is  what the                                                               
DOL gets.                                                                                                                       
The Regulatory  Affairs and Public  Advocacy's (RAPA)  section of                                                               
the DOL  budget for 2017  was $2,333,700. The cap  is $2,374,390;                                                               
so they are pretty close to the  cap. They are not asking to grow                                                               
the cap,  but the  slice of  the pie that  is spent  on pipelines                                                               
right now is  about 7 percent ($162,591) of the  total pie. SB 58                                                               
will allow  them to just increase  the size of the  slice of pie.                                                               
So, if  they are  spending more time  doing pipeline  stuff, they                                                               
want  the authority  to be  able to  charge to  matters that  are                                                               
coming before  the FERC, which  authority they do not  have right                                                               
3:53:09 PM                                                                                                                    
What would SB 58 change?                                                                                                        
     This bill does  not change the .17 percent  RCC cap. It                                                                    
     doesn't create  a new  authority for  the DOL.  It just                                                                    
     allows  some  costs  incurred   by  the  department  in                                                                    
     matters  before FERC  (TAPS  pipeline  tariffs) in  the                                                                    
     pipeline to be charged to the RCC.                                                                                         
The actual dollar impact to the different shippers:                                                                             
     If  they wanted  to burden  the pipelines  with another                                                                    
     $100,000   of  RCC   costs,   based   on  most   recent                                                                    
     information  that  would   increase  the  pipeline  RCC                                                                    
     surcharge by  about .041  percent ($4.10  per $10,000).                                                                    
     Not huge. If  that slice were increased  by $200,000 it                                                                    
     would be $8.20.                                                                                                            
3:54:13 PM                                                                                                                    
Why now?                                                                                                                        
     There  are  some  suspicions  the  bill  trying  to  do                                                                    
     something other  than what  they intend  it to  do. But                                                                    
     for over 30 years,  outside counsel has represented the                                                                    
     state  on  FERC  pipeline  matters. That  has  been  an                                                                    
     incredibly expensive contract. To  reduce costs, DOL is                                                                    
     developing  the necessary  expertise and  bringing more                                                                    
     of  this work  in-house.  As part  of  doing that  they                                                                    
     found  this mechanism  to offset  some of  those costs,                                                                    
     because  it's the  pipelines that  are benefiting  from                                                                    
     their work.                                                                                                                
3:55:11 PM                                                                                                                    
This won't impact AKLNG, Mr.  Sniffen said. That's an exclusively                                                               
FERC  regulated pipeline.  There  is no  joint jurisdiction  with                                                               
RCA.  It's a  gas pipeline  regulated under  the Natural  Gas Act                                                               
unlike  TAPS which  is regulated  under  the Interstate  Commerce                                                               
Act. This is not related to the gas pipeline at all.                                                                            
3:55:37 PM                                                                                                                    
Is there a check on the RCC spending? The answer is yes.                                                                        
     1. RCCs  to fund  RAPA cannot  exceed the  0.17 percent                                                                    
     2. RAPA's budget  is submitted annually to  the RCA for                                                                    
     review  of RAPA's  certified costs  in a  public docket                                                                    
     where any interested party can comment.                                                                                    
3:56:25 PM                                                                                                                    
SENATOR MEYER asked how much  unrestricted general funds (UGF) is                                                               
spent by DOL annually for FERC work.                                                                                            
MR. SNIFFEN replied outside council  has been paid $90 million in                                                               
30 years  for FERK work on  TAPS tariff issues. Some  years are a                                                               
lot higher  when litigation  is going on.  This year  an in-house                                                               
assistant  attorney general  is focused  on doing  this work  but                                                               
still relying a  little bit on outside  counsel (their historical                                                               
knowledge is not easily replaced) and they might spend $700,000.                                                                
SENATOR  MEYER  asked  if  this  bill  passes  will  it  cause  a                                                               
reduction in UGF.                                                                                                               
MR. SNIFFEN said yes, but it would be a small one.                                                                              
SENATOR MEYER  said he  didn't see that  reflected in  the fiscal                                                               
SENATOR MEYER  asked how much  the DOL currently receives  in RCC                                                               
for RCA work.                                                                                                                   
MR. SNIFFEN answered their budget for 2017 was $2,333,700.                                                                      
3:59:01 PM                                                                                                                    
CHAIR GIESSEL  asked if the  Department of Law has  the expertise                                                               
to completely take over this kind of oversight.                                                                                 
MR.  SNIFFEN answered  no, but  they are  getting closer  and big                                                               
chunks of  that work has  already been taken over  in-house. FERC                                                               
work is  very specialized and  the department hasn't done  it for                                                               
30 years. When the state had  money, it wasn't an issue. Spending                                                               
has  been reduced  by hundreds  of thousands  of dollars  already                                                               
this  budget  year.   He  added  that  FERC   matters  happen  in                                                               
Washington,  D.C.  and outside  counsel  will  probably still  be                                                               
retained an advisory role.                                                                                                      
CHAIR  GIESSEL  asked  if  this   bill  would  simply  allow  the                                                               
department to do that in a more robust way.                                                                                     
MR. SNIFFEN  answered yes;  it gives  them more  flexibility with                                                               
using their budget.                                                                                                             
4:00:36 PM                                                                                                                    
SENATOR STEDMAN  asked if a previous  administration terminated a                                                               
long  standing relationship  with FERC  attorneys the  state used                                                               
back  in the  early  Palin days.  Didn't they  shift  gears to  a                                                               
different firm?                                                                                                                 
MR. SNIFFEN  said he  wasn't aware of  any shift.  The department                                                               
has  used  different firms  for  FERC  work: Morrison  Forrester,                                                               
which they currently contract with,  and Greenberg Traurig, which                                                               
is working on other projects for the state.                                                                                     
SENATOR STEDMAN  recalled the  later company was  the one  he was                                                               
thinking of and asked if he knew Bob Loeffler.                                                                                  
MR. SNIFFEN answered  yes; Bob Loeffler is  partner with Morrison                                                               
Forrester, who recently retired.                                                                                                
4:01:46 PM                                                                                                                    
SENATOR  WIELECHOWSKI asked  what percent  of the  costs incurred                                                               
for this work  comes from the general fund (GF)  and what percent                                                               
is incurred by the people who are being regulated.                                                                              
MR.  SNIFFEN answered  right now  they are  spending at  least 90                                                               
percent  GF money  for FERC  work, and  to the  extent they  have                                                               
direct RCA proceedings  that involve a FERC matter  they can also                                                               
bill to  RCCs. Their  statute only allows  them to  recover money                                                               
for work before the RCA for the FERC.                                                                                           
SENATOR WIELECHOWSKI asked how much that costs.                                                                                 
MR. SNIFFEN guessed about $500,000 - $700,000 year.                                                                             
4:03:19 PM                                                                                                                    
SENATOR WIELECHOWSKI asked if they  would have to adjust the bill                                                               
to get  the companies to repay  100 percent of the  costs and how                                                               
much  has  been recovered  over  the  years on  these  regulatory                                                               
4:03:47 PM                                                                                                                    
MR. SNIFFEN answered they had  recovered over $230 million in the                                                               
last  several  years in  direct  deposits  to the  Constitutional                                                               
Budget  Reserve (CBR)  and the  General  Fund (GF)  from work  on                                                               
pipeline  matters involving  TransAlaska  Pipeline System  (TAPS)                                                               
tariff rates.                                                                                                                   
To his  first question: what it  would take to cover  that gap in                                                               
completely funding all their work.  They gave it some thought and                                                               
have  to grow  the statutory  .17  percent statutory  cap to  .23                                                               
percent. That would provide an  additional $700,000 and pay in an                                                               
average year for all their FERC work.                                                                                           
4:04:43 PM                                                                                                                    
SENATOR MEYER  asked if  the statutory formula  would have  to be                                                               
changed from .17 percent to .23 percent.                                                                                        
MR. SNIFFEN answered  yes; but just in rough terms.  If the state                                                               
wanted to recover an additional  $700,000 - $750,000 through this                                                               
mechanism that cap would have to increase by about .06 percent.                                                                 
CHAIR GIESSEL asked why that isn't proposed.                                                                                    
MR.  SNIFFEN  said  they  didn't  want  to  be  greedy,  and  the                                                               
department  is still  gaining  more  experience before  adjusting                                                               
CHAIR  GIESSEL  opened  public  testimony.  Seeing  none,  closed                                                               
public testimony.                                                                                                               
CHAIR GIESSEL said SB 58 would be held in committee.                                                                            

Document Name Date/Time Subjects
Agenda-3-20-17.pdf SRES 3/20/2017 3:30:00 PM
1. Big Game Commercial Services Board Fact Sheet.pdf SRES 3/20/2017 3:30:00 PM
Big Game Commercial Services Board
2. Big Game Comm Serv Board - Resume - Tiffany.pdf SRES 3/20/2017 3:30:00 PM
Big Game Commercial Services Board
3. SB 58 - Version A.PDF SRES 3/20/2017 3:30:00 PM
SB 58
4. SB 58 - Transmittal Letter from Governor.pdf SRES 3/20/2017 3:30:00 PM
SB 58
5. SB 58 - Summary Document.pdf SRES 3/20/2017 3:30:00 PM
SB 58
6. SB 58 - Hearing Request to Senate Resources Committee.pdf SRES 3/20/2017 3:30:00 PM
SB 58
7. SB 58 - Fiscal Note - Dept Law Civil Division - 2 - 13 - 17.PDF SRES 3/20/2017 3:30:00 PM
SB 58
8. SB 58 - Presentation to Senate Resources - 3 - 20 - 17.pdf SRES 3/20/2017 3:30:00 PM
SB 58
9. Big Game Comm Serv Board - Support for Tiffany - Kelly Vrem - 3 - 20 - 17.pdf SRES 3/20/2017 3:30:00 PM
Big Game Commercial Services Board