Legislature(2003 - 2004)

05/12/2003 03:18 PM FIN

Audio Topic
* first hearing in first committee of referral
+ 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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