Legislature(1995 - 1996)

02/02/1995 01:35 PM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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                     HOUSE FINANCE COMMITTEE                                   
                        February 2, 1995                                       
                            1:30 P.M.                                          
                                                                               
  TAPE HFC 95-15, Side 2, #000 - end.                                          
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House Finance  Committee                 
  meeting to order at 1:35 p.m.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley               Representative Kohring                         
  Co-Chair Foster               Representative Martin                          
  Representative Mulder         Representative Navarre                         
  Representative Brown          Representative Parnell                         
  Representative Grussendorf    Representative Therriault                      
  Representative Kelly                                                         
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  George  Dozier,  Staff,  Representative Kott;  Robert  Lohr,                 
  Executive Director, Alaska  Public Utilities, Department  of                 
  Commerce and Economic Development;                                           
                                                                               
  SUMMARY                                                                      
                                                                               
  HB 99     An  Act  extending  the  Alaska  Public  Utilities                 
            Commission;  and  relating   to  regulatory   cost                 
            charges.                                                           
                                                                               
            CSHB 99 (FIN) was reported out of Committee with a                 
            "do pass" recommendation and  with two zero fiscal                 
            notes by the Department of Administration and  the                 
            Department of  Revenue, dated  2/1/95; and  with a                 
            fiscal impact note  by the Department  of Commerce                 
            and Economic Development, dated 2/1/95.                            
  HOUSE BILL NO. 99                                                            
                                                                               
       "An   Act   extending  the   Alaska   Public  Utilities                 
       Commission; and relating to regulatory cost charges."                   
                                                                               
  GEORGE  DOZIER,  STAFF,  REPRESENTATIVE  KOTT  testified  in                 
  support  of  HB 99.   He  explained  that the  Alaska Public                 
  Utilities Commission (APUC)  is in its sunset  year and will                 
  terminate without  legislative action.   He  emphasized that                 
                                                                               
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  the APUC has been effected by the  its uncertain future.  He                 
  observed that HB  99 would  extend the APUC  until June  30,                 
  1999.  Regulatory cost charges would be enacted for pipeline                 
  carriers  and traditional  utilities.   The  regulatory cost                 
  charge would be capped  at .8 percent of the  gross revenues                 
  of the utility being regulated.  The legislation directs the                 
  APUC to make periodic adjustments if collections surpass the                 
  amount  needed  to  operate  the  APUC.    Charges would  be                 
  collected by the Department of Revenue on a quarterly basis.                 
  If  funds lapse  the legislation  would have  the  option to                 
  reappropriate  the  amount  to  the APUC.    He  noted  that                 
  Representative Kott  supports the  addition of  an immediate                 
  effective date.                                                              
                                                                               
  Representative Brown asked the reason  for the increase from                 
  .61 to .8 percent.   Mr. Dozier explained that  the increase                 
  was added  in response to  the provision which  would permit                 
  electrical utilities to deduct the  cost of power generation                 
  or purchase from  their gross revenues.   He explained  that                 
  the change was  a response to  the perception that the  APUC                 
  was spending a  disproportionate amount time and  expense on                 
  non-electric utilities.                                                      
                                                                               
  In  response  to  a question  by  Representative  Brown, Mr.                 
  Dozier  indicated  that  it is  difficult  to  ascertain the                 
  amount  of time  spent  by the  Commission  on each  utility                 
  served.                                                                      
                                                                               
  Co-Chair Hanley disclosed that his mother is a member of the                 
  APUC.   Representative  Foster disclosed  that her  husband,                 
  Mark  Foster,  is  working   under  contract  for  Anchorage                 
  Telephone Company.                                                           
                                                                               
  ROBERT  LOHR,  EXECUTIVE DIRECTOR,  ALASKA  PUBLIC UTILITIES                 
  COMMISSION testified  in support of  HB 99.   He  reiterated                 
  that absent legislation the  Commission will terminate  June                 
  30,  1995.    He  stressed  that  the  consequences  of  the                 
  termination of the  Commission would be dramatic.   He noted                 
  that  no provisions  for  the transfer  of  responsibilities                 
  provided under AS 42.05 and AS 42.06 to  another entity.  He                 
  stressed that the statutes are not self executing.                           
                                                                               
  Mr. Lohr emphasized that an audit by the Legislative Auditor                 
  found that the Commission is meeting its public  purpose and                 
  recommended an extension  of ten years.  He  reiterated that                 
  HB 99  extends the  Commission until  1999 and reenacts  the                 
  regulatory cost  charge.   He recalled  that the  regulatory                 
  cost  charge was repealed  effective December 31,  1994.  He                 
  observed that the FY 95 appropriation to the Commission  was                 
  $3.6 million dollars.  General  fund program receipts raised                 
  from  the  regulatory  cost  charge  was identified  as  the                 
  funding source.  However, the regulatory cost charge expired                 
                                                                               
                                2                                              
                                                                               
                                                                               
  half way through the fiscal year.  The Commission elected to                 
  double  the  collection of  fees  from utilities  during the                 
  first half of the year by amendment of regulations.  Fees to                 
  utility costumers  were kept  at the  same level.   Fees  to                 
  utility costumers continued  since they are pursuant  to the                 
  Commission's general powers and duties.                                      
                                                                               
  Mr.  Lohr  noted  that  another  area  of  concern  was  the                 
  Commission's legal authority during its wind down year.  The                 
  Attorney  General  advised   that  despite  differences   in                 
  language between Title  8 and 44, that  the Commission could                 
  continue its legal authority.                                                
  Mr. Lohr pointed out that the Commissions ability to recruit                 
  employees has been inhibited.                                                
                                                                               
  Mr.  Lohr  stressed  that there  has  been  minimal costumer                 
  complaint in regards to the regulatory cost charge.                          
                                                                               
  In response to  a question by Representative Brown, Mr. Lohr                 
  explained that the  Commission has  not tract allocation  of                 
  time by utility type.  He noted that significant costs would                 
  be involved  in order to implement tracking  mechanisms.  He                 
  questioned  assumptions used by  the Legislative  Auditor to                 
  assess  the Commission's  workload.   The auditor  concluded                 
  that  electric  utilities  had  less  activity  before   the                 
  Commission   than  other   utilities,   such  as   telephone                 
  utilities.  He emphasized that variations exist over time.                   
                                                                               
  In response to a question  by Representative Brown, Mr. Lohr                 
  explained that the  new provisions on  page 2, line  7 -  11                 
  would not  add to  the Commission's  administration expense.                 
  He added  that the  cost of  power exclusion  is subject  to                 
  varied   interpretation  and   could  be   the  subject   of                 
  contention.                                                                  
                                                                               
  Mr. Lohr  estimated that  the reduction  in regulatory  cost                 
  charge payments by electric utilities would be approximately                 
  45 percent.  He  observed that costs would be shifted to all                 
  other regulated  utilities.   The change  would reflect  the                 
  perception that  electric are over paying for  the amount of                 
  regulatory services that  they currently receive.   Mr. Lohr                 
  did not believe that the electric utilities are over paying.                 
                                                                               
  In  response to  a  question by  Co-Chair  Foster, Mr.  Lohr                 
  explained that the rates do not vary by area.                                
                                                                               
  Representative Kelly questioned if other utilities will make                 
  the case that  new criteria should  be used to adjust  their                 
  rates.   Mr.  Lohr agreed that  the Commission  is concerned                 
  that  if rates  are  itemized for  one  utility, or  measure                 
  regulatory  services  against  payment,  that  it  would  be                 
  appropriate  for  all regulated  utilities.   He  noted that                 
                                                                               
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  previous  debate   proposed  that   pipelines  be   itemized                 
  separately   from  utilities.     The  Senate  rejected  the                 
  separation of pipelines from utilities.   The Commission was                 
  directed to  consolidate pipelines and  utilities and  limit                 
  its  collection to  the  total amount  needed  to match  its                 
  operating budget.                                                            
                                                                               
  In response  to a  question by  Representative Kohring,  Mr.                 
  Lohr reiterated that  the Commission doubled its  first year                 
  charge.                                                                      
                                                                               
  Representative Kohring questioned  if urban areas containing                 
  competitors should  be allowed  to  regulate themselves,  in                 
  terms of maintaining competitive rates.  Mr. Lohr emphasized                 
  that competition would not necessarily  breakdown on a rural                 
  urban bases.   He noted that  competition is viable in  long                 
  distance calling.   He emphasized that where  competition is                 
  viable there  is less  need for regulation.   He  recognized                 
  that  where  there is  a  dominate carrier  involved  with a                 
  significant market share that there  may be some necessarily                 
  of regulation.   He  stressed that  industry competition  is                 
  preferred to  Commission regulation.   He acknowledged  that                 
  Commission regulation  is to be  a proxy, or  substitute for                 
  competition.                                                                 
                                                                               
  Representative  Therriault  questioned  the substitution  of                 
  "may" for "shall" on  page 3, line 16.   Mr. Lohr  explained                 
  that the language would  restore the status quo of  the last                 
  two  years.   He  noted  that  the language  would  allow an                 
  intervener  to be apportioned  their fair share  cost by the                 
  Commission.                                                                  
                                                                               
  Representative Therriault provided members with Amendment 1,                 
  9-LS0454\C.4  by  Representative Kott  (Attachment  1).   He                 
  explained  that  the   amendment  would  add  an   immediate                 
  effective date.   Representative  Therriault MOVED to  adopt                 
  Amendment 1.  There being NO OBJECTION, it was so ordered.                   
                                                                               
  Representative Brown MOVED to delete (3),  page 2, lines 9 -                 
  11.  Representative  Mulder OBJECTED.   Mr. Lohr noted  that                 
  the ceiling was  raised from .61  to .81 in response  to the                 
  inclusion of (3) to accommodate the shift in funding.                        
                                                                               
  Representative Brown noted that ".81"  should be deleted and                 
  ".61" added on page 1, line 2  and page 4, line 2.  Mr. Lohr                 
  noted  that the amendment to  the amendment would reduce the                 
  cap to the amount the  Commission previously operated under.                 
  He  observed  that  the  Commission  has  found  the  amount                 
  sufficient.                                                                  
                                                                               
  Representative MOVED to AMEND her  amendment to delete ".81"                 
  and add ".61" on page 1, line 2 and page 4, line 2.                          
                                                                               
                                4                                              
                                                                               
                                                                               
  In response to a question  by Representative Therriault, Mr.                 
  Lohr  identified  the direction  to  identify the  amount of                 
  carryover  balance   and  authorizes   the  legislature   to                 
  appropriate the balance  back to  the Commission and  reduce                 
  the subsequent year rate as the only changes from the status                 
  quo.                                                                         
                                                                               
  Representative  Mulder WITHDREW his  OBJECTION.  There being                 
  NO  OBJECTION, (3),  page 2,  lines 9  - 11 was  deleted and                 
  ".81" was deleted and ".61" added on page 1, line 2 and page                 
  4, line 2.                                                                   
                                                                               
  Representative Navarre clarified that page 2, line 5 applies                 
  to power sold  among utilities.   Mr. Lohr  stated that  the                 
  language protects  the double  charging the  same dollar  of                 
  gross revenue.   Power sold  to a  commercial or  industrial                 
  customer is  gross revenue  subject to  the regulatory  cost                 
  charge.                                                                      
                                                                               
  Representative Kohring MOVED to report CSHB 99  (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal notes.  There being NO OBJECTION, it was                 
  so ordered.                                                                  
                                                                               
  CSHB 99 (FIN) was reported out of Committee with a "do pass"                 
  recommendation  and  with  two  zero  fiscal  notes  by  the                 
  Department of Administration and the  Department of Revenue,                 
  dated  2/1/95;  and  with  a   fiscal  impact  note  by  the                 
  Department  of  Commerce  and  Economic  Development,  dated                 
  2/1/95.                                                                      
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 2:30 p.m.                                           
                                                                               
                                                                               
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