Legislature(2003 - 2004)
05/12/2003 03:18 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 12, 2003
3:18 P.M.
TAPE HFC 03 - 88, Side A
TAPE HFC 03 - 88, Side B
TAPE HFC 03 - 89, Side A
CALL TO ORDER
Co-Chair Williams called the House Finance Committee meeting
to order at 3:18 P.M.
MEMBERS PRESENT
Representative John Harris, Co-Chair
Representative Bill Williams, Co-Chair
Representative Kevin Meyer, Vice-Chair
Representative Berkowitz
Representative Mike Chenault
Representative Richard Foster
Representative Mike Hawker
Representative Kerttula
Representative Carl Moses
Representative Bill Stoltze
Representative Jim Whitaker
MEMBERS ABSENT
Representative Eric Croft
Representative Reggie Joule
ALSO PRESENT
Senator Ben Stevens; Kristi Tibbles, Staff, Senator Ben
Stevens; Randy Ruaro, Staff, Representative Bill Williams;
Jeff Ottensen, Acting Director, Statewide Planning Chief,
Division of Statewide Planning, Department of Transportation
& Public Facilities; Kristy Caitlin, Director, Governmental
Affairs, AT&T Alascom, Anchorage; Pat Luby, Alaska
Association of Retired Persons (AARP), Juneau; Dana Tindall,
Senior Vice President of Legal Affairs, GCI, Anchorage; Matt
Davidson, Alaska Conservation Voters
PRESENT VIA TELECONFERENCE
Chris Kennedy, Assistant Attorney General, Department of
Law, Anchorage; Dave Harbour, Chair, Regulatory Commission
of Alaska, Anchorage; Eric Yould, Executive Director, Alaska
Rural Electric Cooperative Association (ARECA), Anchorage;
Jim Rowe, Director, Alaska Telephone Association, Anchorage;
Leonard Steinberg, Vice President, General Counsel, Alaska
Communication Systems (ACS), Anchorage; Steve Hamlen, United
Utilities, Anchorage; Steve Conn, Attorney, Former Executive
Director, Alaska Public Interest Research Group (AKPIRG),
Anchorage; Daniel Patrick O'Tierny, Assistant Attorney
General, Department of Law, Anchorage;
SUMMARY
HB 111 An Act extending the termination date of the
Regulatory Commission of Alaska; and providing for
an effective date.
HB 111 was reported out of Committee with a "no
recommendation" and with fiscal note #1 by the
Department of Community & Economic Development.
HB 145 An Act relating to public interest litigants and
to attorney fees; and amending Rule 82, Alaska
Rules of Civil Procedure.
CS HB 145 (FIN) was reported out of Committee with
a "no recommendation" and with zero note #1 by the
Department of Law and zero note #3 by the
Department of Administration.
HB 216 An Act relating to municipal taxation of refined
fuel products.
HB 216 was SCHEDULED but not HEARD.
HB 267 An Act relating to the Alaska Railroad;
authorizing the Alaska Railroad Corporation to
provide financing for the acquisition,
construction, improvement, maintenance, equipping,
or operation of facilities for the transportation
of natural gas resources within and outside the
state by others; authorizing the Alaska Railroad
Corporation to issue bonds to finance those
facilities; and providing for an effective date.
HB 267 was SCHEDULED but not HEARD.
HB 313 An Act authorizing a pilot program relating to
state procurement and the use of electronic
commerce tools; and providing for an effective
date.
HB 313 was SCHEDULED but not HEARD.
CSSB 71(TRA) An Act relating to funding for transportation
projects; and providing for an effective
date.
HCS CS SB 71 (FIN) was reported out of
Committee with a "do pass" recommendation and
with zero note #1 by the Department of
Transportation & Public Facilities.
CSSB 128(FIN) am
An Act relating to licensing common carriers
to dispense alcoholic beverages; and
providing for an effective date.
SB 128 was SCHEDULED but not HEARD.
CS FOR SENATE BILL NO. 71(TRA)
An Act relating to funding for transportation projects;
and providing for an effective date.
Co-Chair Harris MOVED to ADOPT work draft #23-LS0583\U,
Utermohle, 5/12/03, as the version of the legislation before
the Committee. There being NO OBJECTION, it was adopted.
RANDY RUARO, STAFF, REPRESENTATIVE BILL WILLIAMS, explained
the changes made to the House Finance Committee substitute
st
for SB 71. The change indicates that after October 1,
2006, the amount that the Department of Transportation &
Public Facilities can annually allocate to the track program
for non-restricted highway apportionment reduced from 4% to
2%.
SENATOR BEN STEVENS noted that he did not oppose the House
Finance version of the legislation. He commented on the
original version of the bill in which federal law,
Transportation Efficiency Act (TEA)-21, and its predecessor,
Intermodal Surface Transportation Efficiency Act (ISTEA),
mandates that all states expend at least 10% of Federal
Surface Transportation Program funds on enhancements such as
trails and landscaping. Over the past several years, the
State of Alaska has expended amounts well beyond the minimum
requirements for enhancement projects that could otherwise
be applied to roadway construction and improvement projects.
SB 71 will decrease the amount allocated for the Trails and
Recreational Access Program to be in line with federal
minimum requirements, making available millions for roadway
construction and improvement projects.
SB 71 proposes to reduce the Department of Transportation's
allocation of non-restricted federal apportionments to
projects classified under the Trails and Recreational Access
Program (TRAAK). Under current Department regulations, they
allocate at least 8% percent to TRAAK projects; the House CS
for SB 71 reduces that allocation to not more than 4% in
2004 and not more than 2% in 2006. The bill would redirect
the funding into the Department's allocation for
transportation projects classified under the Community
Transportation Program (CTP), which includes the Statewide
Road Surface Treatment program and the Highway System and
Bridge Refurbishment program.
Administrative Order #161 from 1996, Knowles Administration
established the Trails and Recreational Access for Alaska
(TRAAK) program to address features such as trails, scenic
highways, recreational access points and interpretive
facilities. From 1998 to 2003, over $150 million was
allocated to the TRAAK projects while the federal minimum
for transportation enhancement expenditures was $43 million
dollars, more than a 200% increase. The expenditures do not
include separate bike paths or waysides for individual
construction projects in the National Highway System, the
Alaska Highway system or community transportation programs.
Only a municipality that is federally recognized, as a
Municipal Planning Organization (MPO) would be impacted by
Section (c) of the legislation, which is Anchorage and
Fairbanks. In 1998, the Anchorage Metropolitan Area
Transportation Solutions (AMATS) adopted a policy of
programming 15% of its transportation funding allocation for
enhancements. The three-year average at 15% for
transportation enhancements from 2000-2002 in the
Transportation Improvement Program averaged roughly $5.5
million dollars. If realized, 10% of the Anchorage share of
TEA-21 federal-aid transportation funds for a three-year
average between 2004-2006, would roughly amount to $5.8
million dollars.
Representative Berkowitz inquired about Section 1 of the
bill and comments made regarding exceeding the federal
guidelines. Senator Ben Stevens referenced the spreadsheet,
noting that in FY03, the $6.4 million dollar number came
from a percentage of the none-restricted federal money.
Adding a match to that, the State spent $22 million dollars
for similar projects. Representative Berkowitz asked where
the other $15 million dollars came from. Senator Ben
Stevens replied that it came out of the CTP, the federal
money pot. He referenced the Alaska Trails & Recreational
Access for Alaska (TRAAK) Program handout in the file.
(Copy on File). The bill takes TRAAK money and puts it back
into the CTP.
Representative Berkowitz clarified that the federal
government now provides money to the State with flexibility
on how to appropriate it. Senator Stevens explained that
the federal government provides funding with guidelines on
how much to spent on transportation, clear outs, landscaping
and pedestrian access. The State has been outspending the
minimum by 3 to 1. SB 71 will reduce it to the minimum
requirement.
Representative Berkowitz noticed that since the federal
guidelines address specifics, how was the State able to
exceed the appropriation. Senator Stevens advised that the
federal established criterion is a minimum with no maximum
established. He did not know of a way to get the non-
restricted highway money into non-road projects. The
objective of the legislation is to go to the minimum
required in order to maintain the State's eligibility for
transportation funding and then use 90% of that for road
construction for meeting existing traffic concerns in
Anchorage.
JEFF OTTENSEN, ACTING DIRECTOR, STATEWIDE PLANNING CHIEF,
DIVISION OF STATEWIDE PLANNING, DEPARTMENT OF TRANSPORTATION
& PUBLIC FACILITIES, referenced the large pie chart in the
TRAAK handout. That chart indicates a category of federal
aid received by the State called the Surface Transportation
Program (STP). One of the rules with that category of money
is that 10% be spent on transportation enhancements and 10%
must be spent on safety. Those are minimum amounts.
Representative Berkowitz questioned Alaska's need for a
bill, which determines federal appropriation percentages.
He suggested that should be built in. Senator B. Stevens
disagreed. He stated that the Legislature does not have
anything to do with the Surface Transportation Improvement
Program (STIP) and only approves that program. However, the
program is developed by criteria set forth by the Department
of Transportation & Public Facilities. The legislation
would clarify that in the amount provided by the program,
the amount used on transportation enhancement program would
be limited. The numbers indicate that the State has
exceeded the suggested percentages for the other
enhancements, often by four times the amount of the federal
minimum. The bill is an attempt to clarify in statute, what
the minimum guidelines should be.
Representative Berkowitz noted that STP carries a 10%
minimum enhancement and a 10% minimum safety. He asked if
there were any other requirements and how the State arrived
at the 40% - 50% enhancements. Mr. Ottensen explained that
those are minimum amounts and that the State has the
prerogative for spending more than the minimum on safety
projects.
Representative Berkowitz inquired if the remaining 80% would
be funds that the State was free to use, as needed. Mr.
Ottensen replied that was correct, pointing out the
requirements.
Representative Kerttula asked if under the proposed program,
would funding be taken from other projects. Mr. Ottensen
responded that the State would have to "slow down" the pace
of building TRAAK projects and transportation improvements.
There will be an acceleration of road building projects.
Representative Kerttula noticed that currently, there were
decisions made to spend more funding on alternate types of
projects and that the proposed legislation would shift the
considerations. Mr. Ottensen acknowledged that was correct.
In March 2002, the Department declared 8% be used for the
TRAAK program and 33% for community transportation,
essentially roads and buses. SB 71 was drafted to change
that ratio to 4% & 37%; the committee substitute would
change it further in FY06 to 2% & 39%.
Representative Kerttula inquired if comments had been
received regarding regulations and projects completed. Mr.
Ottensen replied that there had been few comments made.
When Commissioner Barton took over, he determined that
statewide needs for the TRAAK program were too large. Last
year, a public interest finding was made, shrinking the
program to 5%. When SB 71 was drafted, the Department was
consulted and recommended that 4% would be adequate. Mr.
Ottensen acknowledged that the decision had been a "policy
call" regarding basic necessities for Alaskan communities.
He noted that in some parts of the State, transportation is
virtually non-existent.
Representative Kerttula asked if the legislation would
affect all safety entities. Mr. Ottensen explained that
some projects address both safety and enhancement, making
the language confusing.
Representative Kerttula inquired if there was a way to
separate safety projects under the current spending. Mr.
Ottensen replied that would be difficult but they could
provide that information in a few days as the projects are
all coded.
Representative Berkowitz stated that Subsection © intrudes
on local control. Senator Stevens commented that to be able
to comprehend the impact of Section ©, it is important to
note that that the allocation to AMATS recently had an
increase to the reallocation transportation project. It
moved from 22% to 27.5%, shifting the money. The Department
of Transportation & Public Facilities recognizes that shift
and increase in allocation. He noted that his position was
to realize that increase and not spend 15% on road
enhancement but rather return it to 10%. He pointed out
that the $5.7 million dollars used for trails has proven to
build a good trail system in Anchorage and kept up with the
steady expansion of other projects.
Representative Berkowitz commented on the determinations
made by AMATS, agreeing that those should essentially be
local considerations. Senator B. Stevens interjected that
it was local determination utilizing federal money and was
another example of exceeding minimum requirements for
federal money.
Representative Berkowitz asked if Subsection © would apply
to any other areas of the State outside Anchorage. Senator
Stevens replied that it would also apply to Fairbanks.
Senator Stevens pointed out that an Administrative Order by
the previous Administration established the existing track
program. That order was signed in 1996. The regulations
were not adopted until March 2002. The Department has been
managing the TRAAK Program for six years.
Representative Kerttula questioned why the percentage was
being dropped to 2% so quickly. Mr. Ottensen responded that
the 2% was the change introduced in the adopted committee
substitute. He added that it had not been a recommendation
made by the Department, however, they are not opposed to it.
There is a tremendous need reservoir for highways and that
the global warming is having a devastating effect on the
State's highways. Senator Stevens noted that the Department
of Transportation & Public Facilities has indicated over a
$3 billion dollar backlog in road projects. He reiterated
that the State should stay within the federal minimums.
Representative Berkowitz asked if there was anything in
Subsection © that would impede Anchorage or Fairbanks from
adopting it on their own. Mr. Ottensen replied there was
not.
MATT DAVIDSON, ALASKA CONSERVATION VOTERS, testified against
the legislation and the changes proposed in the committee
substitute. He claimed that it was totally appropriate for
the State of Alaska to spend more money on transportation
enhancements than the federal minimal. In Alaska, these
monies are used on a wide variety of projects. Putting only
2% into the enhancements would be a dramatic change. He
provided a list of scheduled projects for this year created
in October 2002. These projects total $30 million dollars.
Under SB 71, in 2006, that amount would be cut to $7 million
dollars statewide. Mr. Davidson urged that current funding
remain in place.
Representative Chenault responded that there have been no
new roads built statewide for many years and that in his
district, some of the roads are not safe to drive. He noted
that he would be willing to give up trails and wayside
enhancements for safe roads.
Representative Kerttula asked the percentage of TRAAK
projects that had been scheduled for safety. Mr. Davidson
responded that they had not worked it out that way. He did
not know if the cuts in the proposed funding could go to the
reconstruction of the roads without major overhauls. Those
are capital budget discussions.
Representative Berkowitz MOVED to delete Subsection ©,
allowing municipalities to make their own decisions on how
to use the funds. He urged more local control.
Representative Stoltze OBJECTED.
KRISTI TIBBLES, STAFF, SENATOR BEN STEVENS, stated that
Senator Stevens would oppose the recommended change.
A roll call vote was taken on the motion.
IN FAVOR: Kerttula, Moses, Berkowitz
OPPOSED: Meyer, Stoltze, Whitaker, Chenalut, Foster,
Hawker, Harris, Williams
THE MOTION FAILED (3-8).
REPRESENTATIVE KERTTULA MOVED to ADOPT Amendment #2, which
would keep the percentages at the 4%/37% margin, allowing 4%
go to projects classified under the Trails and Recreational
Access. She thought that type project would use safety
projects such as widening school crossings.
Co-Chair Williams OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Moses, Berkowitz, Kerttula
OPPOSED: Meyer, Stoltze, Whitaker, Chenault, Foster,
Hawker, Williams, Harris
THE MOTION FAILED (3-8).
Representative Foster MOVED to report HCS CS SB 71 (FIN) out
of Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
HCS CS SB 71 (FIN) was reported out of Committee with a "do
pass" recommendation and with zero note #1 by the Department
of Transportation & Public Facilities.
HOUSE BILL NO. 145
An Act relating to public interest litigants and to
attorney fees; and amending Rule 82, Alaska Rules of
Civil Procedure.
CHRIS KENNEDY, (TESTIFIED VIA TELECONFERENCE), ASSISTANT
ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE, commented on
the changes made to the work draft adopted on May 9, 2003.
He pointed out that the House Judiciary version of the bill
abolished public interest litigant's status and did so for
only cases involving decisions by one of the natural
resource agencies. Whereas, the proposed committee
substitute differs in two main ways:
· It does away with public interest litigant status in
all cases. It would abolish the public interest
litigant doctrine which is a common law doctrine by
the Alaska Supreme Court System about 25-years ago.
It also recreates something similar to the public
interest litigant doctrine by statute, only in
constitutional cases. The net result will be
regarding the question of special treatment for
attorney fee matters.
· It goes beyond the area of fees and into the area of
bonds and security that courts require for
preliminary injunctions. It insures that a variance
of a public interest litigant doctrine cannot be
used to create a special exemption-posting bond.
That issue resulted from a response from an
unpublished order in a Cook Inlet lawsuit. The
committee substitute preemptively does address that
issue in Section #3 by insuring that bonds or
securities protects the party that is being
restrained. Those kinds of bonds or securities will
be applied across the board rather than a potential
for discrimination. In those cases, the committee
substitute does not differentiate between
constitutional and non-constitutional.
Representative Berkowitz inquired what would be needed
before a person could qualify as a public interest litigant.
TAPE HFC 03 - 88, Side B
Mr. Kennedy explained that the current public litigant
status consists of a four-part test. The person must
qualify for all four items of the criteria.
· The case needs to be designed to effectuate strong
public policy.
· The case must be one in which numerous people would
benefit from the success of the lawsuit.
· It would have to be a case that only a private party
was expected to bring.
· The party bringing the case cannot have significant
economic incentive to otherwise bring the suit.
That requirement is the core of the public litigant
status.
Representative Berkowitz asked if there recently had been an
increase in public litigant litigation. Mr. Kennedy did not
know if there had been a recent increase. The number of
reported cases has been between 40 & 50. It is difficult to
project the total number of cases as many do not go to
appeal, which results in a reported decision. Often the
public interest doctrine plays into the way the case is
settled.
Representative Berkowitz asked what the language "plays a
role" means. Mr. Kennedy explained that one role could
create an uneven playing field in litigation. An adverse
outcome does not need to be of a concern to prevail. On the
other, should one of the claims be successful, there could
be a considerable award, which could include the attorney
fees. He suggested that the uneven incentive structure
encourages people to bring cases that include more
speculative claims than an ordinary litigant might incur.
Representative Berkowitz asked how many of those cases
involved natural resources. Mr. Kennedy stated
approximately 10% of the total.
Representative Berkowitz voiced concern that the legislation
attempts to fix problems with public litigant suits thus,
slowing down development statewide. He claimed that the
legislation was "over reactive" if indeed, only 10% of the
cases involved natural resources. Mr. Kennedy pointed out
that the committee substitute sought to address a broad
selection of cases, which is one of the fundamental
differences between the House Finance version and the House
Judiciary version. The House Judiciary version was aimed
solely at resource issues and cases; this legislation is
considerably broader.
Representative Berkowitz referenced the case involving the
Capital Information Group. Mr. Kennedy stated that there
had been quite a bit of litigation under the Public Records
Act and that there are times when the requestors prevail.
Representative Berkowitz asked if there was concern from the
Administration that eliminating this part of the public
interest litigant verbiage could have a "chilling" effect on
the transparency of government, making records less
accessible to the public. Mr. Kennedy responded that there
is no concern along those lines. He indicated that the
committee substitute does not create any penalty for that
type case but rather treats them similarly to other civil
litigation. The Administration hopes that by having this
set of incentives, it will become possible to focus on facts
of potential claims.
Co-Chair Williams pointed out Amendment #1, offered by
Representative Berkowitz. (Copy on File).
Representative Kerttula requested a breakdown from the
Attorney General's office of the cases that were either lost
or settled under public interest litigants. Mr. Kennedy
indicated that they do not keep complete records of that
nature. There is a chart of all awards made in the natural
resource cases over the last ten years. There has not been
a need to "pull together all the cases", that involved the
public litigant doctrine. In response to a query by
Representative Kerttula, Mr. Kennedy speculated that the
State had won most of those cases.
Representative Kerttula asked how high the bonds were. Mr.
Kennedy advised that the bonds could be quite high, since
their purpose was to keep the party from being enjoined and
added that there is no fixed amount for a preliminary
injunction.
Representative Kerttula asked if they had been routinely
waived for public interest litigants. Mr. Kennedy indicated
that recently there has been an expansion of that law. The
intent of the committee substitute is to guarantee that the
public interest doctrine is not expanded.
Representative Kerttula requested a copy of the unpublished
opinion. Mr. Kennedy agreed to provide that to the
Committee.
Representative Berkowitz MOVED Amendment #1. Co-Chair
Williams OBJECTED.
Representative Berkowitz explained that there are problems
experienced by public litigants and that the amendment would
address the delay brought about by court cases. He
speculated that the larger problem has to do with
uncertainty, not the process. The amendment preserves the
public interest litigants and would instead require an
expedited proceeding, to ensure that if there was a
challenge to regulation or permitting that it could be
addressed quickly with something equivalent to a criminal
"speedy trial".
Co-Chair Williams asked what would happen if neither side
could reach an agreement in the 120 days. Representative
Berkowitz explained, according to the criminal model, that
the party would have the option of choosing. The person who
is the subject of the suit would control the delay in the
process, not the person bringing it.
Mr. Kennedy noted that the Administration would oppose
Amendment #1. He maintained that the amendment would change
the "thrust of the bill". He noted that the intent of the
legislation was to reform the public interest litigation
policy, and that the current system encourages "kitchen
sink" litigation. Mr. Kennedy commented that the committee
substitute was protective of constitutional rights, creating
special treatment and simplifies the doctrine for those
cases, thus, lowering the bar. The legislation is more
protective of constitutional rights than is current law.
Mr. Kennedy pointed out that the substance of the amendment
would add a new Section #1. He acknowledged Representative
Berkowitz's desire to expedite the process, adding that in
an effort to change the manner in which civil litigation is
handled and changing the court schedule are complex issues
and should be worked out carefully. The Administration
would be reluctant to have the Legislature add such language
without the opportunity to consult with trial attorneys. He
reiterated that the Administration would oppose Amendment
#1.
Representative Berkowitz questioned the theory that the
amendment would increase litigation. He stressed that it
would leave the field basically unchanged. He added that
the proposed fundamental change is complex and needs careful
working, which goes to the heart of the bill. The public
litigant doctrine is a "central issue of democracy" and is
one of the few areas in which a single citizen could "stand
up and try to affect change". He stressed that it is
tremendously significant.
Representative Berkowitz acknowledged that the
Administration might not support the amendment, but pointed
out the purposes indicated, the most important purpose is
the significant costs associated with the process to the
State and private citizens. He reiterated that those costs
result from delays and uncertainties.
A roll call vote was taken on the motion.
IN FAVOR: Moses, Berkowitz, Kerttula
OPPOSED: Stoltze, Whitaker, Chenault, Foster, Hawker,
Meyer, Harris, Williams
The MOTION FAILED (3-8).
Representative Foster MOVED to report CS HB 145 (FIN) out of
Committee with individual recommendations and with the
accompanying fiscal note.
Representative Kerttula OBJECTED.
Representative Kerttula emphasized that the problems with
private parties often revolve around delays. Cases in which
public interest litigants have been successful, normally
involve local community cases. She stated that when those
cases are lost, the Alaska Supreme Court System has decided
that those people should not be responsible to burden the
"looser pay rule". Alaska is the only State that uses that
rule and is an unusual rule in America. The legislation
will cut off an important avenue allowing for certain cases
to come forward and not facing the kind of financial burden
that would exist in another case. She noted that she did
not support the bill and would continue to work to define
amendments for the House Floor.
Representative Berkowitz commented that he had not observed
"real evidence" around how difficult public interest
litigants are. The difficult nature of public interest
litigation addresses subsistence, reapportionment, recall,
access, fishing and zoning violations. That is what every
person does when the government is not doing that job for
him or her. This is an ancient doctrine, which allows
people to stand up when the laws are not being enforced.
The proposed legislation is a sustained attack on the
public. The current version should have been brought
forward before the House Judiciary Committee because of the
serious legal ramifications. The bill must be improved; the
House Finance Committee does not understand the consequences
of why it is before them.
A roll call vote was taken on the motion.
IN FAVOR: Stolze, Whitaker, Chenault, Foster, Hawker,
Meyer, Williams, Harris
OPPOSED: Berkowitz, Kerttula, Moses
The MOTION PASSED (8-3).
CS HB 145 (FIN) was reported out of Committee with a "no
recommendation" and with zero note #1 by the Department of
Law and zero note #3 by the Department of Administration.
HOUSE BILL NO. 111
An Act extending the termination date of the Regulatory
Commission of Alaska; and providing for an effective
date.
Co-Chair Williams MOVED to bring up the original version of
the bill before the Committee rather than the House Labor
and Commerce version. There being NO OBJECTION, the
original version was before the Committee.
DAVE HARBOUR, (TESTIFIED VIA TELECONFERENCE), CHAIR,
REGULATORY COMMISSION OF ALASKA (RCA), ANCHORAGE, supported
approval of the Governor's version of the bill. He noted
that at this time "nothing is broken" and nothing needs
fixing. Extending the RCA for another four years, members
should know that:
· Their predecessors and members in 1990, provided
action to change the way that business was done for
the RCA but changing the Alaska Public Utilities
Commission (APUC) into the RCA with new rules. That
action was successful. He noted that when action
was taken in 1999, the APUC was overwhelmed by the
500 cases before them. Now, the normal number of
cases per year is between 160-200. The number of
cases processed should equal the number of cases
that come in.
· The Legislative Budget and Audit Committee (LBA) has
noted the improvement of the Commission.
LEONARD STEINBERG, (TESTIFIED VIA TELECONFERENCE), VICE
PRESIDENT OF GENERAL COUNSEL, ALASKA COMMUNICATION SYSTEMS
(ACS), ANCHORAGE, testified that ACS would support the House
Labor and Commerce version of the legislation. ACS would
not support authorizing RCA without further policy guidance.
It is important to note that many things are being powered
with shortsighted regulatory policies. Policies today are
broken and are in need of repair and that the State
Legislature should remedy these concerns. Alaska is being
harmed because the one sided policies keep new investment
discouraged in the telecommunication infrastructure. ACS
cannot make any money under the current rules. Competitors
have no incentive to invest. Today, State regulatory policy
obligates ACS to lease its facilities at rates below sale
costs, providing a subsidy to the competitors. Mr.
Steinberg stressed that Alaskans prefer regulations that are
fair, providing a level playing field. He reiterated that
ACS supports the House Labor and Commerce version of the
legislation and offered to answer questions of the
Committee.
JOE GRIFFITH, (TESTIFIED VIA TELECONFERENCE), CEO, CHUGACH
ELECTRIC, ANCHORAGE, echoed comments made by the previous
speaker, Mr. Steinberg. He disagreed that "nothing was
broken". The Commission results are broken and have placed
many major entities in the Rail belt in financial
difficulties. Inappropriate work from RCA has cost Chugiak
Electric a lot of money and continues to impact them. No
group should have the authority to place another entity into
financial difficulty from mistakes that they make. The
issue results from the fact that RCA is not capable of doing
the work that the State expects of them, representing the
current market place. The new rules have not worked and the
quality of the product is exceptionally bad. The proper
criterion is how well is the Commission serving the market
place and doing the work expected of them. The costs
encountered from the Rail belt will be with them for years,
creating consternation among rating agencies. The most
recent case cost over $5 million dollars. RCA does not have
the right to make mistakes and to continue producing the
product it has.
JIM ROWE, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, ALASKA
TELEPHONE ASSOCIATION (ATA), ANCHORAGE, echoed comments made
by the previous speaker, Mr. Griffith. He reiterated that
the rural companies are very concerned that things are
"wrong" and have been wrong with the current system. He
spoke against the new Chair of the Commission. There had
been full discussion given to those considerations in the
House Labor and Commerce Committee. Amendments are needed
and they have been submitted by many entities before the
State Legislature. He pointed out that telecommunication
concerns have been before the Legislature for many years.
He predicted that within four years, there will be
devastation within the industry.
STEVE HAMLEN, (TESTIFIED VIA TELECONFERENCE), UNITED
UTILITIES, ANCHORAGE, spoke in support of comments made by
Mr. Rowe. He noted that United Utilities was a member of
the Alaska Telephone Association (ATA).
TAPE HFC 03 - 89, Side A
Mr. Hamlen warned that decisions made by RCA in the past
couple years have created great concerns for other business
statewide. He warned that small local business and coops
would be regulated out of existence. He urged that HB 111
be passed as amended in the House Labor and Commerce
Committee.
ERIC YOULD, (TESTIFIED VIA TELECONFERENCE), EXECUTIVE
DIRECTOR, ALASKA RURAL ELECTRIC COOPERATIVE ASSOCIATION
(ARECA), ANCHORAGE, noted that his utilities generate
approximately 90% of the State's electricity. Last year,
the Legislature indicated that they would put together a
task force to press changes to the RCA. ARECA took that
recommendation seriously and had a number of meetings,
providing amendments that would streamline the agency.
Mr. Yould echoed agreement with Mr. Griffith that RCA needs
reform. The amendments were provided to both the House
Labor and Commerce Committee and the House Finance Committee
members. ARECA strongly believes that there are changes
which need to be made to RCA. The amendments have been on
the table for months and the Legislature has not chosen to
address them.
Mr. Yould emphasized that they do not support the version of
the legislation before the Committee and do not support a
four-year extension to RCA. The industry only supports a
one-year extension of the Commission without incorporating
the proposed amendments. He pointed out that the LBA
Committee recommended that RCA be extended for only two
years.
STEVE CONN, (TESTIFIED VIA TELECONFERENCE), ATTORNEY, FORMER
EXECUTIVE DIRECTOR, ALASKA PUBLIC INTEREST RESEARCH GROUP
(AKPIRG), ANCHORAGE, explained that the one "hope" that
consumers, both rural and urban, have in Alaska, is both a
strong and vital regulatory commission. The work they do
should keep virtual monopolization and exploitation from
occurring to the consumers. He noted that the utilities
continue to be exempt from laws governing monopoly. That
exemption should be dropped. Mr. Conn agreed with the
Governor that the Commission should be extended for another
four years. The focus should be that the consumers voice is
heard within the RCA and stressed that would be difficult
and detailed work. He noted that he did support the
original bill.
PAT LUBY, ALASKA ASSOCIATION OF RETIRED PERSONS (AARP),
JUNEAU, stated that AARP is in support the reauthorization
of the RCA. The RCA is the only place that a consumer can
go with a utility problem. Mr. Luby recommended that the
bill pass as proposed by the Governor, a clean bill with no
amendments.
KRISTY CAITLIN, DIRECTOR, GOVERNMENTAL AFFAIRS, AT&T
ALASCOM, ALASKA, testified that Alascom has a long history
of providing telecommunications services to the State of
Alaska. It has the longest history of any inter-exchange
carrier in the State.
Ms. Caitlin stated that both telecom service providers and
policy-makers have a twofold obligation to the constituents
of the State.
· To ensure that basic telecom services remain
affordable to everyone in the State; and
· To provide a regulatory environment that fosters
continued investment in the telecom infrastructure,
ensuring that advanced services reach all parts of
the State.
In the early days, Alascom was the only long distance
carrier in Alaska, and as such, the regulated monopoly. In
1991, when intrastate long distance competition was
initiated, additional regulations were developed to ensure
that Alascom did not misuse its monopoly power to subvert
competition. The new regulations, granted new long-distance
competitors broad and significant freedoms. Competition
grew and flourished. In 1995, AT&T bought Alascom.
Many of the regulations that restrict AT&T Alascom today are
vestiges of the old monopolistic environment. However, in
this highly competitive marketplace, they do not serve as an
incentive for investment and only serve to add cost and
provide a disincentive for investment. It was deregulation
of the industry and the management of competition that
spurred investment. In 1995, when AT&T fell below 60%
market share in the lower 48, the Federal Communications
Commission (FCC) ceased regulating AT&T as the "dominant
carrier" and deemed the market for long distance as
competitive.
Ms. Caitlin noted that AT&T Alascom currently has 42% of the
long distance business and that their largest competitor,
General Communications Incorporated (GCI) has 46-48% of the
long distance business. Regulations add substantially to
cost structures for tracking, journalizing and reporting.
It also adds regulatory process that the competitors do not
have. The situation really is one of "dominance" and with
increased costs and inability to compete because of outdated
regulations; ability to attract capital and invest in the
network is hamstrung.
She pointed out that Alascom's proposed amendment language
would establish a definition of "dominance." The amendment
was intended to level the playing field so that all carriers
could play by the same rules. The amendment is specifically
intended to benefit Alaska consumers by:
· Ensuring a healthy competitive environment through
equalizing regulatory requirements for all players;
· Reducing regulatory cost; and
· Increasing competitive flexibility.
Eliminating the additional costs and filing requirements,
the amendment would directly increase AT&T Alascom's ability
to more effectively compete and that the consumers would
ultimately benefit from the increased competition.
Over the next 12 to 18 months, Alaska must wrestle with some
difficult issues regarding telecom regulation. At stake is
the survival of an infrastructure, which is struggling to
keep up with the rest of the country. In a true free
market, there is less regulation, not more; and competition,
not regulation, becomes the force to shape the market.
DANA TINDALL, SENIOR VICE PRESIDENT OF LEGAL AFFAIRS, GCI,
spoke in support of the RCA, requesting that it be extended
for an additional four years. She pointed out that the
"stated" purposes of the amendments proposed were supposedly
to accelerate the development of competition and promote
investment and the improvement of existing facilities used
to provide telecommunications services. However, in
reality, the effect of the amendments would eliminate
competition and allow ACS and other telephone companies to
implement rate increases to consumers, while eliminating
regulatory requirements to upgrade existing facilities.
· The amendments would allow all local telephone
companies to implement rate increases to Alaska's
consumers.
Depreciation expense is one large components of the costs
that regulated utilities are allowed to collect from
ratepayers. Regulated depreciation rates are based on the
actual, useful service life of the equipment used to provide
service. However, ACS is dissatisfied with the service
lives set by the RCA after a recent proceeding in which it
was seeking to raise rates. Section 4 of the previous
version would reverse RCA's decision and authorize all
telephone utilities to base depreciation on the service
lives permitted by the Internal Revenue Service (IRS) for
income tax purposes. Use of that would allow ACS and all
other telephone companies, to implement rate increases to
all ratepayers.
Ms. Tindall noted that Section 2 of the House Labor and
Commerce version would allow local telephone companies to
implement rate increases without any oversight from RCA.
· The amendments would allow local and long distance
carriers to discriminate between customers and areas
within the State.
Ms. Tindall pointed out that Section 5 of the previous
version would declare the entire State "competitive" for
long distance service and completely exempts all long
distance carriers from rate regulation by the RCA. The
exemptions would be available to long distance companies
immediately and to any local phone company as soon as any
competitor was able to provide service, but before actual
development of competition.
· The amendments would allow ACS to eliminate
competition and that the amendments are contrary to
federal law and would create tremendous market
uncertainty.
Ms. Tindall continued, Section 8 of the House Labor and
Commerce version allows ACS, without any negotiation to
unilaterally increase the rates it charges to GCI pursuant
to the existing Interconnection Agreement that was
arbitrated under federal law and approved by the RCA. The
pricing standard set in Sections 4 and 8 are contrary to the
pricing requirements set by federal law and upheld by the
United States Supreme Court.
· In direct contradiction of the stated purpose, the
amendments eliminate requirements to upgrade
existing networks.
Ms. Tindall pointed out that Section 1 of the amended
version stipulates that the amendments are intended to
improve the existing facilities used to provide local phone
service; however, Section 3, prohibits the RCA from
requiring phone companies to improve existing facilities.
The amendment was targeted at a regulation adopted by the
RCA in 1997 requiring all phone companies to support a data
transmission rate of 28.8 kilobits per second by 2003.
Furthermore, Section 5 exempts local phone companies from
the statutory requirement (AS 42.05.291) to maintain "safe
services and facilities" that allows RCA to require
correction of unsafe facilities.
· In direct contradiction to the stated purpose, the
amendments discourage investment in
telecommunication facilities in Alaska.
Ms. Tindall indicated that Section 1 states that existing
policies favoring local competition actually discourage
investment in Alaska's telecommunication facilities. She
noted that the argument is false and has been rejected by
the United States Supreme Court.
· The amendments would require GCI to protect ACS from
the effects of competition.
Ms. Tindall reiterated that the GCI leases portions of ACS'
facilities to provide local phone service, and GCI pays RCA-
approved rates for those facilities. The important aspect
of the federal Telecommunications Act enables incumbents
like ACS to continue to receive revenue even for customers
served by a new competitor. Nonetheless, ACS has complained
bitterly about the requirement that it allows GCI to use its
facilities, and because of poor service and high rates of
ACS, GCI is developing its own local exchange facilities.
Representative Stoltze MOVED to place HB 111 into a
subcommittee to address the many different concerns and view
points expressed. Co-Chair Williams OBJECTED.
DANIEL PATRICK O'TIERNY, (TESTIFIED VIA TELECONFERENCE),
ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, ANCHORAGE,
interrupted the discussion. He encouraged the Committee to
retain the Governor's original "clean bill", which seeks the
extension of the termination date for the RCA. He stated
that the amendments would open up issues from past "phone
wars". Several of the amendments implicate federal law and
the Federal Communications Commission (FCC) directives.
RCA's decisions are currently subject to judicial review.
Several of the amendments involve technical features of
ratemaking that do not lend themselves to making policy.
Finally, he noted that several of the amendments relate to
ongoing RCA proceedings. Given the significant issues
currently before this Legislature and the limited time
before session ends, to other than simply extend the RCA
will guarantee another chapter in Alaska's "phone war".
Co-Chair Harris asked for assurance from the Administration
regarding this issue. He observed that the issue had been
raised for the last five years. There has been reference to
the restructuring of the RCA during past legislatures. A
number of companies have "taken exception" to decisions
and/or operations made by RCA. He asked if the
Administration was willing to work with those companies
during the interim to craft legislation addressing the
concerns. Mr. O'Tierney affirmed that the Administration
would endeavor to create such legislation.
Representative Berkowitz questioned the impact on existing
RCA rulings if the Commission were to sunset. Mr. O'Tierney
was uncertain regarding those impacts.
Co-Chair Williams expressed his faith that the current
Administration would resolve the RCA concerns.
Representative Berkowitz disagreed.
Representative Foster MOVED to report HB 111 out of
Committee with the accompanying fiscal note.
Representative Berkowitz OBJECTED.
Representative Berkowitz maintained that public testimony
was not yet complete, and suggested that more information
was needed. Co-Chair Williams responded that members had
plenty of information provided by the lobbyists as well as
discussion provided in the House Labor and Commerce
Committee. He reiterated his trust in the Governor's
office.
Representative Berkowitz indicated that he had further
questions. Co-Chair Williams interjected that there would
be future opportunities to discuss this bill during the
Legislative process.
A roll call vote was taken on the motion.
IN FAVOR: Whitaker, Chenault, Foster, Hawker, Meyer,
Moses, Stoltze, Harris, Williams
OPPOSED: Berkowitz, Kerttula
The MOTION PASSED (9-2).
HB 111 was reported out of Committee with a "no
recommendation" and with fiscal note #1 by the Department of
Community & Economic Development.
ADJOURNMENT
The meeting was adjourned at 5:27 P.M.
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