Legislature(2003 - 2004)
03/04/2004 09:05 AM House CRA
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* first hearing in first committee of referral
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+ teleconferenced
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ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS
STANDING COMMITTEE
March 4, 2004
9:05 a.m.
MEMBERS PRESENT
Representative Carl Morgan, Chair
Representative Kelly Wolf, Vice Chair
Representative Pete Kott
Representative Tom Anderson
Representative Ralph Samuels
Representative Sharon Cissna
MEMBERS ABSENT
Representative Albert Kookesh
COMMITTEE CALENDAR
HOUSE BILL NO. 515
"An Act relating to the regulation of municipal water and sewer
utilities not in competition with other water and sewer
utilities."
- MOVED HB 515 OUT OF COMMITTEE
HOUSE BILL NO. 308
"An Act related to exchanging public land for privately held
riverbank and stream bank lands."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 515
SHORT TITLE: MUNICIPAL WATER AND SEWER UTILITIES
SPONSOR(S): LABOR & COMMERCE
02/18/04 (H) READ THE FIRST TIME - REFERRALS
02/18/04 (H) CRA, L&C
03/04/04 (H) CRA AT 8:00 AM CAPITOL 124
BILL: HB 308
SHORT TITLE: EXCHANGE PUBLIC LAND FOR STREAM BANK LAND
SPONSOR(S): REPRESENTATIVE(S) GARA
05/08/03 (H) READ THE FIRST TIME - REFERRALS
05/08/03 (H) CRA, RES
03/04/04 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
MARK PREMO, General Manager
Anchorage Water and Wastewater Utility (AWWU)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 515.
MARK JOHNSON, Commissioner, Chair
Regulatory Commission of Alaska (RCA)
Department of Community & Economic Development (DCED)
Anchorage, Alaska
POSITION STATEMENT: Characterized HB 515 as legislation that
represents a fundamental policy call on the part of the
legislature.
CRAIG GOODRICH, Deputy Fire Chief
Anchorage Fire Department
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 515.
ROBERT LOHR
Office of Management & Budget
Municipality of Anchorage
POSITION STATEMENT: Testified on HB 515.
REPRESENTATIVE LES GARA
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of HB 308.
DOUG VINCENT-LANG, Assistant Director
Division of Sport Fish
Alaska Department of Fish & Game (ADF&G)
Juneau, Alaska
POSITION STATEMENT: Answered a question, during discussion of
HB 308.
ACTION NARRATIVE
TAPE 04-9, SIDE A
Number 0001
CHAIR CARL MORGAN called the House Community and Regional
Affairs Standing Committee meeting to order at 9:05 a.m.
Representatives Morgan, Wolf, Kott, Anderson, and Samuels were
present at the call to order. Representative Cissna arrived as
the meeting was in progress.
HB 515-MUNICIPAL WATER AND SEWER UTILITIES
CHAIR MORGAN announced that the first order of business would be
HOUSE BILL NO. 515, "An Act relating to the regulation of
municipal water and sewer utilities not in competition with
other water and sewer utilities."
REPRESENTATIVE ANDERSON, as chair of the House Labor and
Commerce Standing Committee, sponsor of HB 515, explained that
HB 515 would exempt the Anchorage Water and Wastewater Utility
(AWWU) from regulation by the Regulatory Commission of Alaska
(RCA). In Alaska, no other municipally owned water or
wastewater utility is regulated by the RCA, save Pelican. He
noted that Pelican requested regulation of its wastewater
utility by the RCA. Representative Anderson related that the
Municipality of Anchorage (MOA) believes that current RCA
regulation processes are cumbersome, slow, expensive, and
nonresponsive to Anchorage's needs. The ratepayers are required
to pay for the expensive RCA regulatory process as a surcharge
on the ratepayer's monthly bill, regardless of whether the
ratepayer's utility has a case pending. For example, from 1993-
2003 AWWU didn't have a rate increase before the RCA or its
predecessor, the Alaska Public Utilities Commission (APUC).
However, AWWU ratepayers have paid a regulatory assessment to
the RCA as a part of every bill. In 2004, AWWU ratepayers are
projected to pay about $500,000 to the RCA, which would cover
the costs of regulation, or lack thereof. Representative
Anderson pointed out that the greatest costs appear in the form
of regulatory delay in obtaining approval of a requested change.
REPRESENTATIVE ANDERSON highlighted that MOA is directly
accountable to the ratepayers served by its utilities. He noted
that MOA has experienced successful regulation of enterprise
activities, such as the Port of Anchorage. Representative
Anderson pointed out that municipal public hearings are held on
any proposed rate increase. In this case HB 515 changes
existing law by adding lines 5-8, on page 2. He noted that MOA
supports this [legislation].
Number 0419
MARK PREMO, General Manager, Anchorage Water and Wastewater
Utility (AWWU), began by noting that he has held his position as
general manager since 1990. Mr. Premo provided the following
testimony:
I am testifying this morning in support of House Bill
515. This bill would exempt AWWU from regulation by
the RCA and place it in the same status as every other
municipally owned water and wastewater utility in
Alaska, except one.
First, some background: AWWU is two separate
utilities, both subject to economic and surface area
regulations by the RCA. The water utility, a former
City of Anchorage utility, has been under RCA
regulation since inception of the APUC in 1970. The
Anchorage Sewer Utility, which was formerly owned by
the greater Anchorage-area borough, was voluntarily
submitted to the APUC for regulation in 1971. An
umbrella organization, AWWU, was formed in 1975
following unification of the Municipality of
Anchorage. The Municipality of Anchorage in 1991
petitioned the then-APUC to exempt AWWU and its
electric utility from regulation. The commission is
split evenly by a 2 to 2 vote on the question of
exempting the electric utility and AWWU. The opinion
by the commissioners opposing self-regulation at that
time site competition by the municipality's electric
utility and telephone utility with other utilities as
the primary reason why AWWU should remain regulated by
the state. No commissioner suggested then or has
since suggested that competition between the water and
wastewater was present. Nor is there any competition
there today.
The municipality decided its exemption from RCA
regulation for two broad reasons. First, the current
RCA regulation process and procedures are slow and
expensive. From 1993 to 2003, AWWU never requested a
rate increase. Yet, in fact, AWWU ratepayers have
paid approximately $2.8 million to regulatory
assessments to the RCA during this period (indisc.)
every monthly bill, and are projected to pay $485,000
in 2004 ... to cover the cost of regulation. However,
the greater cost to AWWU and its customers is in the
form of the cost preparing filings and regulatory
(indisc.). History shows that local regulation is
faster, less structured, and more economical. Our
second reason is that current RCA regulations and
procedures are nonresponsive to local needs. The RCA
process is very structured. The RCA process was
designed for public utilities and it's not entirely
appropriate for municipal utilities. The municipality
is more responsive to local needs and is directly
accountable to the ratepayers who are served by the
utility. These customers are also municipal voters.
Public hearings are held by the municipality on all
rate matters. I ask the committee's support of House
Bill 515, self-regulation has worked effectively
across the nation and in other Alaska communities and
in Anchorage. Actually, Anchorage has regulated its
own public utilities for many more years than the
state regulators. The Municipality of Anchorage has a
proven track record of successfully regulating the
Port of Anchorage, Merrill Field, and Solid Waste
Services. All are financially strong, highly
reputable enterprises that provide excellent customer
service. AWWU has provided its customers excellent
service; low, stable rates; and sound finances. Over
the years the mayor and assembly have made sound
decisions in their oversight of AWWU and other
municipally owned utilities. In conclusion, with the
passage of House Bill 515, municipal regulation of
AWWU will balance customer protection with financial
soundness and AWWU will continue to operate on a sound
business basis.
Number 0824
MARK JOHNSON, Commissioner, Chair, Regulatory Commission of
Alaska (RCA), Department of Community & Economic Development
(DCED), noted that he worked with Mr. Premo [for the City of
Anchorage] about 15 years ago. Mr. Johnson characterized HB 515
as legislation that represents a fundamental policy call on the
part of the legislature. Obviously, there are policy and
political dimensions to this legislation. He said that he would
address the policy issues today. Mr. Johnson mentioned that
there may be some dispute with regard to the amount of
regulatory cost charge (RCC) payments from AWWU to the RCA
because the RCA places [AWWU's] payments from last year at a
little less than what Mr. Premo suggested. However, he said he
didn't want to get bogged down in a discussion of who pays what.
MR. JOHNSON related the RCA's perspective that there are
benefits to RCA jurisdiction over [AWWU]. The primary benefit
has been relative rate stability over time. There has been a
suggestion that AWWU has paid for services that it hasn't
received. However, Mr. Johnson pointed out that the true
beneficiary of the process isn't the utility but rather the
consumers. As a result of the RCA's composite regulatory
approach, the consumers of water and sewer services in Anchorage
have benefited significantly from having stable rates over an
extended period time. Although Mr. Johnson opined that AWWU is
a relatively well-run utility, he emphasized that removing RCA
jurisdiction would result in a fundamentally different framework
for the consideration of rates for a significant portion of the
state's population. He suggested that the benefits [of removing
RCA's jurisdiction] may be unclear. For example, under
municipal regulations rate changes would occur with a simple
adoption of an ordinance by the Anchorage Assembly. The
aforementioned is a fundamentally different process than that of
the RCA, which bases its decisions on considerable detail, a
written record, and impartial commissioners who sit independent
of one another.
MR. JOHNSON commented that the alternative regulation process
[proposed in HB 515] isn't particularly well suited to address
some complex issues such as rate discrimination, whereas the RCA
is well suited and constituted to conduct inquiries on such a
basis. Furthermore, the RCA believes it does a good job with
such [inquiries] and is probably prepared to deal with problems
inherent in municipal operations, such as assessing the
reasonableness of payments in lieu of taxes. Recently, the
municipality instituted a major change in its approach to
[payments in lieu of taxes]. He indicated that some of the
resulting questions will be regarding when an exaction is a
payment from a municipally owned utility. Further questions
will be regarding the amount of the fee and whether it's
reasonable. Under municipal regulations, the RCA believes the
aforementioned questions, that is the line between municipal
taxes [and utility expenses], will be blurry.
MR. JOHNSON opined that the RCA has special expertise and is
uniquely situated to address issues that pertain to service area
disputes. Within MOA there are entities that provide water and
sewer service, but aren't part of AWWU, he noted. He further
opined that the RCA is in a good position to address
consolidation issues. The RCA, he related, believes that its
regulation of AWWU has generally been beneficial to consumers,
which the RCA believes is where the legislature should focus its
attention. Mr. Johnson acknowledged that Anchorage is the
largest municipal water and sewer entity subject to regulation.
However, the vast majority of water and sewer customers in
Alaska are subject to RCA jurisdiction.
Number 1355
REPRESENTATIVE CISSNA inquired as to situations in which the RCA
has utilized its regulatory authority.
MR. JOHNSON informed the committee that the RCA serves as the
appropriate contact for public complaints regarding water and
sewer services by AWWU customers. Over the last couple of
years, the RCA has received 18 complaints of various types.
Since 1989, there have been 69 filings, including tariff issues,
made by AWWU before the RCA. These matters take time, he said.
Mr. Johnson mentioned that the RCA has just considered a rate
increase that is in connection with the [municipal payment in
lieu of taxes]. The RCA has allowed the rates in this case to
go into effect on a temporary basis, although the permanent
rates are suspended pending an investigation by the RCA. Mr.
Johnson clarified, "Certainly, ... it's not been intensive
relative to this utility [AWWU] over the last decade, but
certainly the activity, in our estimation, is going to be
picking up."
REPRESENTATIVE CISSNA related her understanding that if a
utility has any change at all, it has to approach the RCA. She
inquired as to what the 18 complaints and 69 filings look like.
MR. JOHNSON said that he could forward [the committee] the list
of tariff filings. The most recent filing from AWWU was very
well prepared. However, these are detailed issues addressing
the revision of services to particular customers; how people
hook up to the utility; the rates charged for hooking up to the
utility. The filings are quite varied, he stated.
Number 1703
REPRESENTATIVE SAMUELS turned to a situation in which AWWU
wanted a rate increase or decrease, and inquired as to the
mechanism or process the municipality would have to address
that.
MR. PREMO, with regard to the type of filing, answered that from
1992 [to present] AWWU could account for three different type of
filings based on the workload for the RCA. One type of filing,
such as for a rate increase, would require detailed work. There
are also filings that require low to moderate work, such as
minor service area questions, tariff rule questions, or
miscellaneous fee questions. Furthermore, there are the annual
filings, such as the annual RCC rate increases. From 1992 [to
present] there were five in-depth filings regarding rate cases
and the cost of service. In the low to moderate work level,
there were 13 filings. However, there were 48 filings in the
category of routine, annual work. Therefore, since 1992 there
were 129 filings, with only five being classified as requiring
in-depth work.
MR. PREMO turned to the process for rate setting envisioned in
Anchorage. There have been extensive conversations with the
mayor and the chair of the Anchorage Assembly on this matter.
The aforementioned parties are in agreement that a better way to
do business needs to be established. He expressed the need to
create a structure that [allows] full engagement with the
customers and runs as a business enterprise with a long-term,
healthy organization. This points to a strong board of
governance. He likened the structure to the ATU [Anchorage
Telephone Utility] board in the late 1990s. He specified that
he envisioned a board with rate-setting powers along with three
to four steps that would require concurrence of the
administration and the assembly through an ordinance process.
[Those steps] would specifically discuss [AWWU's] long-range
financial plan and annual budget. Mr. Premo clarified that the
strong board governance model would go through the rate process
similar to the RCA, including holding public hearings regarding
the rate case. Additionally, the standard accounting principles
that apply in [AWWU's] filings with RCA will remain the same
with the board.
REPRESENTATIVE SAMUELS asked whether AWWU is self-sufficient, or
receives state or municipal money. He asked if AWWU pays a
dividend to the municipality.
MR. PREMO replied that AWWU does receive money from the state,
but he pointed out that it's related to the capital program.
With regard to operating dollars, AWWU is 100 percent self-
sufficient. The rates cover the operating expenses. At this
time AWWU doesn't pay a dividend to the general government,
although AWWU does pay money to the general government through
the "IGC" formula for services it provides. Additionally, AWWU
pays a payment in lieu of taxes.
Number 2019
CRAIG GOODRICH, Deputy Fire Chief, Anchorage Fire Department,
testified in support of HB 515 and AWWU. Mr. Goodrich opined
that no one has a "bone to pick" with the RCA, rather it's
merely a matter of philosophy. He noted that the Anchorage Fire
Department works hand-in-hand with AWWU as water is the
department's primary source of extinguishing fires. Mr.
Goodrich pointed out that the Anchorage Fire Department has a
direct and constant interface with the water utility. He opined
that [AWWU] has exercised exemplary service and primarily
focuses on customer service. Therefore, he reiterated support
for HB 515.
Number 2108
ROBERT LOHR, Office of Management & Budget, Municipality of
Anchorage, informed the committee that he was the executive
director of the APUC from 1991-1999 and now is advising the
mayor of Anchorage on utility regulatory issues. Mr. Lohr
opined that there is real value in what the RCA does. However,
the legislature has essentially, on balance, decided that
municipally owned utilities are exempt from rate service and
practice regulation, that is economic regulation by the state.
He noted that there are exceptions to that rule in cases in
which any one utility directly competes with another utility.
For example, if Municipal Light & Power sold wholesale power to
Fairbanks and Chugach Electric, a cooperative, and also wants to
sell power to Fairbanks, then one could argue that is
competition. Under AS 42.05.711(b) all municipally owned
utilities of Anchorage are required to be regulated, simply
because of the competition on the power end. However, this
legislation would change the aforementioned standard to specify
that the exemption applies as long as the utility itself doesn't
directly compete with another water or sewer utility. This
legislation would have the effect of exempting one additional
water and sewer utility from economic regulation by the RCA.
Mr. Lohr turned to the power of the commissioner to set
boundaries, and noted that the service area boundaries for all
utilities would be retained. Therefore, the exemption wouldn't
speak to certificate boundaries, which the RCA would continue to
regulate as it would interconnection disputes.
REPRESENTATIVE ANDERSON highlighted that no other [water and
sewer] utilities are regulated by RCA, other than the City of
Pelican, which requested RCA regulation. Furthermore, AWWU is a
political subdivision and if the rates were increased by a
couple of dollars, there could be a public outcry.
Representative Anderson applauded the job the RCA does, but
noted that the RCA process can be intimidating. Moreover, the
accessibility of the hearing process is a bit more difficult
than a hearing process in Anchorage. Representative Anderson
opined that it's easier [to keep the regulation of AWWU] in the
city, where it would be uniform.
Number 2371
REPRESENTATIVE ANDERSON moved to report HB 515 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 515 was reported from the
House Community and Regional Affairs Standing Committee.
HB 308-EXCHANGE PUBLIC LAND FOR STREAM BANK LAND
CHAIR MORGAN announced that the final order of business would be
HOUSE BILL NO. 308, "An Act related to exchanging public land
for privately held riverbank and stream bank lands."
Number 2436
REPRESENTATIVE LES GARA, Alaska State Legislature, sponsor of HB
308, explained that this legislation was spurred in part by his
interest in fishing and also in part from his realization that
many of the riverbanks are privately owned, although they appear
to be public. For those familiar with the Matanuska Susitna
Valley and the Kenai Peninsula, popular streams such as Montana
Creek, Willow Creek, and Anchor River are privately held. Among
the land that Alaskan outdoors people cherish the most are the
riverbanks. The moment those are sold and public access along
the state's rivers are lost, a large part of Alaska is lost. He
pointed out that this situation exists throughout Alaska.
Therefore, the fishing community has held discussions regarding
what to do to preserve public access along the state's
riverbanks. If these lands are developed, the [state] will
never get them back. For example, Montana devotes about
$300,000 a year toward repurchasing private land. Something
proactive should be done before the problem occurs, he said.
However, it should be voluntary so that it doesn't impact the
rights of property owners and it also keeps the cost down.
Therefore, the thought was to allow the Department of Natural
Resources (DNR) and Alaska Department of Fish & Game (ADF&G) to
offer land trades. The departments could identify important
fishing areas with private parcels that are undeveloped and
offer those property owners land trades of other state land.
REPRESENTATIVE GARA noted that the fiscal notes from DNR and
ADF&G are much higher than he though they would be. Therefore,
he said that he would like to work with the agencies so that the
statute could be reworked. He noted that he has requested a
ranking of different areas of the state and different fishing
streams in order of priority with the top priority being those
streams for which the public would want unfettered public
access. The prioritization process would be expensive, and
therefore he opined that such an approach would have to be
dumped. Therefore, Representative Gara proposed working with
the departments to develop legislation with a minor or zero
fiscal note while maintaining the concept.
REPRESENTATIVE GARA acknowledged that HB 308 and its large
fiscal note can't pass out of committee. To the extent the
committee likes the legislation, there are two options. One
option is for the committee to report the legislation out of
committee and leave it to the sponsor to do it without a large
fiscal note. The other option is for the committee to hold the
legislation. In either case, Representative Gara announced that
he would work with both departments in order to accomplish the
same goal.
Number 2717
REPRESENTATIVE WOLF pointed out that the Kenai River Center has
been doing much work with regard to mapping and categorizing all
the wetlands surrounding the anadromous systems. He specified
that the Kenai River Center and Kenai Peninsula Borough has a
database [of property owners]. Representative Wolf expressed
concern with regard to the fiscal note and other aspects of the
legislation for which he wanted to work on an amendment.
REPRESENTATIVE SAMUELS asked, "Are you talking public lands
anywhere, ... you [are] telling the commissioner to ... make a
deal, don't make a bad deal."
REPRESENTATIVE GARA replied yes, noting that if it isn't a good
deal, there won't be a trade. He noted that he had been
thinking of allowing a trade for property that is valued at up
to 10 percent more. Representative Gara specified that this
legislation isn't talking about taking a lot of property out of
the private domain because the department could just negotiate
for easements, which the state already does. Currently, when
the state gives away property, it preserves an excess of 50 feet
to and along a fishing stream. However, that wasn't the case
prior to 1976. Additionally, for much federal land and certain
state land conveyances [the 50 foot easement] was not preserved.
Therefore, there is much land along rivers [and streams] that
are purely private property and will some day be privately
developed.
REPRESENTATIVE SAMUELS inquired as to how much of the land
[surrounding streams/rivers in Southcentral Alaska] is in
private hands.
REPRESENTATIVE GARA pointed out that the state doesn't have a
good land title system outside the municipality, and therefore
each time there is a question of ownership research is required.
For example, Montana Creek [in Southcentral Alaska] has very
large sections of private land and people aren't aware of it
because there is almost no development along the creek. He
estimated that 25-30 percent of the land surrounding the Salcha
and Anchor Rivers is private property. Representative Gara
confirmed that he was referring to land above the high water
mark.
REPRESENTATIVE WOLF noted that on the Kenai Peninsula there is a
50-foot setback for habitat protection, which means no
structures or development in that area.
CHAIR MORGAN highlighted that most of the property on the
riverbank is more valuable than that farther from the river. He
asked if the trade would be dollar for dollar or acreage for
acreage.
REPRESENTATIVE GARA answered that the trade is based on the
value of the land.
TAPE 04-9, SIDE B
REPRESENTATIVE GARA said that he is intrigued by a trade in
which the property owner could trade for land that is of equal
value [or] up to 10 percent more in value.
REPRESENTATIVE SAMUELS commented that the down side of such is
the negotiating position because if up to 10 percent more in
value is allowed, then that will be given.
Number 2957
REPRESENTATIVE KOTT inquired as to the location of the language
that requires the land exchange to be of equal value. It seems
that the state shouldn't restrict the commissioner from making a
determination of what has to be negotiated. Representative Kott
related his dislike of including "up to 10 percent" language
because he would prefer to leave it up to the commissioner.
However, he opined that it would take more than an equal
exchange to entice him, if he were an owner of riverbank land,
to trade.
REPRESENTATIVE GARA clarified [that the up to 10 percent value
of the trade] is an assumption. He pointed out that the land
trade language is located in Section 2 on page 2. Section 2
provides the commissioner of [ADF&G] the power to exchange.
Although the language doesn't specify that the land being
exchanged has to be of equal value, the property owner will
probably only trade if the land is of equal value.
Representative Gara acknowledged that under this language the
commissioner would probably have the ability to trade something
more valuable for something less valuable. If the desire is to
allow the aforementioned, then language to that effect should be
added.
Number 2857
REPRESENTATIVE WOLF inquired as to the percentage of land that
is part of the flood plain on the Anchor River.
DOUG VINCENT-LANG, Assistant Director, Division of Sport Fish,
Alaska Department of Fish & Game (ADF&G), replied that he would
get an answer for the committee.
REPRESENTATIVE GARA said that he has a map of the lower section
of the Anchor River that specifies where there is public
easement and where there isn't.
Number 2807
CHAIR MORGAN announced that he would hold HB 308 to allow the
sponsor to work with the Department of Natural Resources and the
Alaska Department of Fish & Game on the fiscal note.
REPRESENTATIVE KOTT expressed his hope that Representative Wolf
would also work with Representative Gara. He also expressed the
need for the sponsor to work to reduce the rather hefty fiscal
note of HB 308.
CHAIR MORGAN announced that he ultimately intends to move HB 308
from committee, but is going to provide the sponsor time to work
on the fiscal note.
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 10:58 a.m.
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