Legislature(2017 - 2018)HOUSE FINANCE 519

04/06/2017 09:00 AM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
Moved HB 114 Out of Committee
Moved HB 120 Out of Committee
Moved HB 121 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                       April 6, 2017                                                                                            
                         9:04 a.m.                                                                                              
9:04:08 AM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair Foster called the House Finance Committee meeting                                                                      
to order at 9:04 a.m.                                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Representative Sam  Kito, Sponsor; Deborah  Kelly, Director,                                                                    
Division of Labor Standards and  Safety, Department of Labor                                                                    
and Workforce Development;  Ed Sniffen, Attorney, Department                                                                    
of Law.                                                                                                                         
HB 114    BOILER/PRESSURE VESSEL INSPECTION REPORTS                                                                             
          HB 114 was REPORTED out of committee with a "do                                                                       
          pass" recommendation and with one previously                                                                          
         published fiscal impact note: FN1 (LWF).                                                                               
HB 120    DEPT OF LAW: ADVOCACY BEFORE FERC                                                                                     
          HB 120 was REPORTED out of committee with a "do                                                                       
          pass" recommendation and with one previously                                                                          
          published zero fiscal note: FN1 (LAW).                                                                                
HB 121    OCC. HEALTH AND SAFETY CIVIL PENALTIES                                                                                
          HB 121 was REPORTED out of committee with a "do                                                                       
          pass" recommendation and with one previously                                                                          
         published fiscal impact note: FN1 (LWF).                                                                               
HOUSE BILL NO. 114                                                                                                            
     "An Act relating to boiler and unfired pressure vessel                                                                     
     inspection reports and fees."                                                                                              
9:05:11 AM                                                                                                                    
REPRESENTATIVE   SAM    KITO,   SPONSOR,    introduced   the                                                                    
legislation.  The  bill  included proposed  changes  to  the                                                                    
boiler/pressure  vessel   inspection  reports   program.  He                                                                    
detailed  that  there were  a  limited  but fair  number  of                                                                    
reports   that  were   currently  submitted   manually.  The                                                                    
department [Department  of Labor and  Workforce Development]                                                                    
was required to  take the information and reenter  it into a                                                                    
database. The goal of the  department was to take the manual                                                                    
reports and recover  costs at $10 per report that  had to be                                                                    
filed; however,  there was an electronic  filing option that                                                                    
did not  have the $10  additional fee. He furthered  that if                                                                    
all of  the reports  were filed electronically,  there would                                                                    
be no  additional revenue, but  there would be  less expense                                                                    
for  the  department because  it  would  no longer  have  to                                                                    
manually enter  all of the  reports. The bill  would improve                                                                    
timeliness  of reports  so individuals  would receive  their                                                                    
inspection certificate  quicker and would no  longer have to                                                                    
wait  30 days.  The bill  provided  a cleanup  and aimed  at                                                                    
moving  the inspection  report process  into the  electronic                                                                    
9:07:47 AM                                                                                                                    
Representative  Thompson asked  for verification  there were                                                                    
3,200 manual reports submitted.                                                                                                 
Representative  Kito answered  there  were 3,200  individual                                                                    
boiler  and pressure  vessel reports  that were  filed by  a                                                                    
company manually.                                                                                                               
Representative Wilson  asked if  there would  be individuals                                                                    
who could not submit electronically.                                                                                            
DEBORAH  KELLY, DIRECTOR,  DIVISION OF  LABOR STANDARDS  AND                                                                    
SAFETY,  DEPARTMENT  OF  LABOR  AND  WORKFORCE  DEVELOPMENT,                                                                    
replied   the   3,200   reports    that   were   not   filed                                                                    
electronically was  generally due  to the  fact that  one or                                                                    
two companies  did not want  to use the online  program. She                                                                    
detailed  the process  used software  that required  a usage                                                                    
fee. She  explained that one company  nationwide had decided                                                                    
it would rather rely on the department for its data entry.                                                                      
Representative Wilson asked for the  cost of the system. Ms.                                                                    
Kelly specified  that under  the system  the company  had to                                                                    
negotiate with  the manufacturer  based on company  size and                                                                    
the department had been unable to obtain an estimate.                                                                           
Representative Wilson  wanted to know the  burden that could                                                                    
be  placed  on  the  users.   Ms.  Kelly  replied  that  the                                                                    
department had  unable to obtain the  information, which was                                                                    
the reason  it had gone with  a very reasonable fee  for its                                                                    
data  entry  -  it  was  willing to  offer  the  service  to                                                                    
companies it had.                                                                                                               
Vice-Chair Gara  asked for verification  that the  bill gave                                                                    
companies  the  option  to file  the  reports  manually.  He                                                                    
surmised a  company could file  manually for $10  per report                                                                    
or save the money by filing electronically.                                                                                     
Representative Kito  answered in the affirmative.  There was                                                                    
an  option for  a  company  that did  not  want  to use  the                                                                    
electronic  program. The  department  was  merely trying  to                                                                    
acknowledge  it  had a  cost  associated  with entering  the                                                                    
9:11:49 AM                                                                                                                    
Co-Chair Foster OPENED and CLOSED public testimony.                                                                             
Co-Chair  Seaton   reviewed  the  fiscal  note   1  for  the                                                                    
Department   of  Labor   and   Workforce  Development.   The                                                                    
department estimated the bill  would result in an additional                                                                    
$32,000 in  revenue to the  building safety  account. [Note:                                                                    
Co-Chair  Seaton  referred  to  the  fiscal  note  as  zero;                                                                    
however, the note  was technically a fiscal  impact note due                                                                    
to  the potential  generation of  $32,000 per  year for  the                                                                    
Representative  Wilson remarked  that the  $32,000 would  be                                                                    
generated only  if people chose not  to file electronically.                                                                    
Otherwise the fiscal  note could be zero. She  added she was                                                                    
not sure $10 would cover the whole fee.                                                                                         
Co-Chair  Seaton MOVED  to REPORT  HB 114  out of  committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
There  being  NO  OBJECTION,  HB 114  was  REPORTED  out  of                                                                    
committee  with  a "do  pass"  recommendation  and with  one                                                                    
previously published fiscal impact note: FN1 (LWF).                                                                             
9:14:31 AM                                                                                                                    
AT EASE                                                                                                                         
9:16:21 AM                                                                                                                    
HOUSE BILL NO. 121                                                                                                            
     "An Act relating to occupational safety and health                                                                         
     enforcement penalties; and providing for an effective                                                                      
9:16:26 AM                                                                                                                    
REPRESENTATIVE SAM  KITO, SPONSOR,  explained the  bill that                                                                    
would make  changes to the  state's occupational  safety and                                                                    
health  regulations in  order to  comply  with federal  law.                                                                    
Federal  law   recently  increased  the   minimum  penalties                                                                    
needing to be assessed. He  detailed that because Alaska was                                                                    
a   designated  jurisdiction,   meaning  it   had  its   own                                                                    
responsibility  for  its   occupational  safety  and  health                                                                    
program,  it  was necessary  for  the  state to  update  its                                                                    
program in order to comply  with federal law. The bill would                                                                    
allow  the department  to continue  to adopt  regulations as                                                                    
federal  law  changed  in  order to  ensure  the  state  was                                                                    
meeting the minimum standard. He  relayed that the burden on                                                                    
companies  was   not  increased  due  to   the  increase  in                                                                    
standard.   He  elaborated   there  were   existing  penalty                                                                    
requirements.  When penalties  were  assessed generally  the                                                                    
state assessed  about 10 percent  of the  allowable penalty,                                                                    
but  the  minimum  standards  were  necessary.  Without  the                                                                    
minimum standards  and without compliance with  federal law,                                                                    
the state  ran the  risk of losing  its designation  for the                                                                    
jurisdiction and  the program could  go back to  the federal                                                                    
government.  He explained  that  going back  to the  federal                                                                    
government would  mean that State of  Alaska employees would                                                                    
no  longer be  covered under  workers' compensation  and the                                                                    
Alaska  program  had  some specific  Alaska  components  for                                                                    
occupational  safety  and health,  which  would  be lost  by                                                                    
going to the federal program.                                                                                                   
9:19:08 AM                                                                                                                    
Representative Wilson  noted there  had been a  question and                                                                    
answer sheet that was not  included in members' packets. She                                                                    
read a question  that had been asked in  the House Judiciary                                                                    
Committee:  How  much  would  the  state  save  if  Alaska's                                                                    
occupational safety and health  jurisdiction was returned to                                                                    
federal  Occupational   Safety  and   Health  Administration                                                                    
(OSHA)?  She  noted  that  the  answer  had  been  $619,000;                                                                    
however, penalty  revenue would  go to the  federal treasury                                                                    
instead  of  the  state General  Fund  totaling  $1,031,000,                                                                    
which would result  in a net loss to the  state of $412,000.                                                                    
She   was  in   favor  of   keeping  programs   under  state                                                                    
jurisdiction, but she was concerned  about keeping a program                                                                    
because  the state  could collect  penalties on  businesses.                                                                    
She appreciated  the email the  committee had  received with                                                                    
more explanation.  She wondered if people  were breaking the                                                                    
laws. She asked where the $1 million came from.                                                                                 
DEBORAH  KELLY, DIRECTOR,  DIVISION OF  LABOR STANDARDS  AND                                                                    
SAFETY,  DEPARTMENT  OF  LABOR  AND  WORKFORCE  DEVELOPMENT,                                                                    
referred to  the fiscal note from  the department. Currently                                                                    
the   department   collected   approximately   $600,000   in                                                                    
penalties  per  fiscal  year.   With  the  approximately  78                                                                    
percent  increase, the  department estimated  the collection                                                                    
amount  would increase  by about  $435,000 per  year, for  a                                                                    
total of about  $1 million in penalties.  The penalties were                                                                    
not optional  - they were  either collected by the  state or                                                                    
eventually the  federal takeover  would come in  and collect                                                                    
the penalties. The  $619,000 was the savings  in state funds                                                                    
from the  elimination of  the positions  and the  travel and                                                                    
other  associated costs  for the  enforcement program.  When                                                                    
the savings  were subtracted  from the  loss of  the penalty                                                                    
amount  it resulted  in $412,000.  She  spoke to  collecting                                                                    
penalties  on businesses  in Alaska.  She relayed  that most                                                                    
businesses  tried  to do  the  right  thing. The  department                                                                    
conducted a  significant number  of inspections  every year.                                                                    
She relayed the department was  out in the community, across                                                                    
industries,  seeing businesses  every day.  Many times  when                                                                    
violations were found, the  penalties were reduced sometimes                                                                    
down  to zero  based on  small business  size or  good faith                                                                    
efforts on  the part  of the company.  She relayed  that the                                                                    
department  was not  generally  seeing numerous  violations,                                                                    
which was  the reason it  collected less than 10  percent of                                                                    
the maximum allowable penalties in the course of a year.                                                                        
Representative  Wilson  wondered  if  the  $596,000  was  an                                                                    
average or the figure from  the preceding year. She observed                                                                    
the figure  did not capture  the increase. She  hoped things                                                                    
were  improving as  the department  was  working to  educate                                                                    
9:23:02 AM                                                                                                                    
Ms. Kelly replied  that the $596,000 was the  amount from FY                                                                    
16.  The numbers  fluctuated from  year-to-year, but  not so                                                                    
significantly for  the department  to calculate  an average.                                                                    
The  department was  targeting its  consultation efforts  to                                                                    
try  to  reduce  the  number  of  violations  and  hopefully                                                                    
Vice-Chair  Gara  understood  that  under  federal  law  the                                                                    
penalties had  to be adjusted  for inflation;  however, they                                                                    
had  not  been  adjusted  for inflation  since  1990,  which                                                                    
resulted in the penalty change.                                                                                                 
Ms. Kelly answered in the affirmative.                                                                                          
Vice-Chair Gara  agreed that most  businesses did  the right                                                                    
thing. In the past he  had represented an individual who had                                                                    
been killed  due to an  unsafe work environment  and another                                                                    
individual who had almost been  killed due to an unsafe work                                                                    
Representative  Guttenberg asked  for verification  that the                                                                    
bill would  allow the department  to make  adjustments based                                                                    
on the  federal specifications without  requiring additional                                                                    
legislative  action in  the future.  He spoke  to giving  an                                                                    
agency authority  that was  legislative authority  and asked                                                                    
if it was an issue with the topic at hand.                                                                                      
Ms. Kelly  replied that the  department would be  allowed to                                                                    
make   adjustments  in   accordance  with   federal  penalty                                                                    
amounts. In order  to address that the  department was being                                                                    
given regulatory authority, the  bill included language that                                                                    
the  department  would  be   limited  to  the  corresponding                                                                    
federal  penalty  amounts  for   each  violation  type.  The                                                                    
department was not being given  the authority to decide what                                                                    
penalty amount it wanted - it  could not go above and beyond                                                                    
the corresponding federal penalty.                                                                                              
9:25:53 AM                                                                                                                    
Representative  Guttenberg  remarked   that  Ms.  Kelly  had                                                                    
identified  the $596,000  as fairly  standard. He  asked the                                                                    
department  whether it  had  looked at  the  number of  OSHA                                                                    
inspectors it  had, how many  penalties there had  been, and                                                                    
whether the number of penalties  had changed with the number                                                                    
of  employees the  department had  doing the  work. He  knew                                                                    
that  the department  had lost  numerous employees  over the                                                                    
years and that General Fund dollars had become tighter.                                                                         
Ms. Kelly  responded she  would have to  follow up  with the                                                                    
numbers. There  had been some  small personnel  changes over                                                                    
the years, but it had been relatively steady.                                                                                   
Representative Tilton  referred to  the inspections  done by                                                                    
the   department.  She   asked  if   the  $596,000   was  an                                                                    
accumulation of mostly small fines or larger ones.                                                                              
Ms. Kelly  answered she  would have to  follow up  to answer                                                                    
the  question  in an  exact  sense.  There were  many  small                                                                    
penalties  assessed   over  the   course  of  a   year.  The                                                                    
department did roughly  400 enforcement inspections annually                                                                    
and each one  of the inspections may or may  not result in a                                                                    
penalty. Penalties were generally  small, the exception came                                                                    
when a  particularly egregious violator was  identified such                                                                    
as the  trench collapse that had  been in the news  a couple                                                                    
of  years  earlier. She  detailed  that  there had  been  an                                                                    
attempt to dig  a young man out with  heavy equipment, which                                                                    
had resulted in a substantial penalty.                                                                                          
Co-Chair Foster OPENED and CLOSED public testimony.                                                                             
Vice-Chair  Gara  addressed the  one  fiscal  note from  the                                                                    
Department  of  Labor  and  Workforce  Development.  It  was                                                                    
anticipated  increase  of $217,500  in  FY  18 and  $435,000                                                                    
annually thereafter in penalty revenue to the state.                                                                            
Representative  Wilson  clarified  that  the  revenue  would                                                                    
occur only if  the penalties were fined.  She explained that                                                                    
the  figure in  the fiscal  note was  an estimate  only. She                                                                    
surmised  the amount  was unknown  and hoped  the department                                                                    
would not be writing  numerous citations because things were                                                                    
going well in the business community.                                                                                           
Co-Chair  Seaton MOVED  to REPORT  HB 121  out of  committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
There  being  NO  OBJECTION,  HB 121  was  REPORTED  out  of                                                                    
committee  with  a "do  pass"  recommendation  and with  one                                                                    
previously published fiscal impact note: FN1 (LWF).                                                                             
9:30:49 AM                                                                                                                    
AT EASE                                                                                                                         
9:32:35 AM                                                                                                                    
HOUSE BILL NO. 120                                                                                                            
     "An Act relating to the Department of Law public                                                                           
     advocacy function to participate in matters that come                                                                      
     before the Federal Energy Regulatory Commission."                                                                          
9:32:43 AM                                                                                                                    
ED SNIFFEN,  ATTORNEY, DEPARTMENT OF LAW  (DOL), shared that                                                                    
he  supervised the  Regulatory Affairs  and Public  Advocacy                                                                    
(RAPA) section within the department.  He explained that the                                                                    
bill aimed  at allowing DOL  the flexibility to  spend money                                                                    
it received from a regulatory  cost charge (RCC) for matters                                                                    
currently  done in  front of  the Federal  Energy Regulatory                                                                    
Commission  (FERC). All  of the  utilities and  pipelines in                                                                    
Alaska were  regulated. The Regulatory Commission  of Alaska                                                                    
(RCA) received filings from  pipelines and utility companies                                                                    
to adjust  their rates  frequently and  the RCA  was charged                                                                    
with ensuring  the rates  were fair  and reasonable.  To pay                                                                    
for  the  regulation,  the RCA  imposed  a  regulatory  cost                                                                    
charge on  all utilities.  He noted it  appeared as  a small                                                                    
charge on  users' utility  bills. The cost  went to  pay for                                                                    
the  function  of  the RCA  to  provide  its  administrative                                                                    
regulation of utilities.  The DOL also received  a portion -                                                                    
RAPA also appeared before the  RCA to protect consumers. The                                                                    
agency  operated to  protect individual  consumers' interest                                                                    
in their  rates. For example,  when a company  (e.g. Enstar,                                                                    
Chugach, or Juneau Electric) wanted  to raise its rates, DOL                                                                    
went to  the Public Utility  Commission to ensure  the rates                                                                    
were fair  and reasonable.  The department  was able  to use                                                                    
money  from  the  regulatory  cost charge  to  pay  for  its                                                                    
services.  He  provided  a  PowerPoint  presentation  titled                                                                    
"HB120:  Regulatory Cost  Charge  for  FERC Matters."  dated                                                                    
April 6, 2017 (copy on file). He addressed slide 2:                                                                             
     The RCC is a fee assessed on public utilities and                                                                          
     pipelines that are regulated by the Regulatory                                                                             
     Commission of Alaska (RCA).                                                                                                
     It is created by AS 42.05.254 and AS 42.06.286.                                                                            
Mr.  Sniffen  briefly  discussed  slides  3  through  5.  He                                                                    
elaborated that  charges assessed by the  RCA were generally                                                                    
passed  on  to customers  -  those  were the  customers  who                                                                    
received  a benefit  of the  regulation. Each  year the  RCA                                                                    
assessed the  RCCs to utilities  and pipelines based  on the                                                                    
amount of  work required by  each industry sector.  It meant                                                                    
that  if in  a particular  year  there was  much time  spent                                                                    
doing  electric utility  regulation, the  electric utilities                                                                    
would pay  a little more  of the regulatory cost  charge and                                                                    
if the following year more  in gas regulation was conducted,                                                                    
gas utilities  may pay  a little more  of that  cost charge.                                                                    
The money  paid for the work  of the RCA and  DOL to perform                                                                    
the  functions  and  to  ensure  the  rates  were  just  and                                                                    
Mr.  Sniffen  turned  to  slide   6  and  relayed  that  the                                                                    
legislature had established  a cap of 0.87  percent on RCCs,                                                                    
which was  split between the  RCA and RAPA sections  of DOL.                                                                    
The RCA could not exceed  0.70 percent of the adjusted gross                                                                    
revenue of all of the  utilities and pipelines in Alaska and                                                                    
RAPA  could  not  exceed  0.17 percent  of  the  amount.  He                                                                    
addressed  slide 7,  which included  a pie  chart of  RAPA's                                                                    
2017  budget. The  statutory  cap in  2017  had been  $2.374                                                                    
million and  its budget submitted  to the RCA had  been $2.3                                                                    
million.  He detailed  that approximately  7 percent  of the                                                                    
total had  been used  for work related  to pipelines  and 93                                                                    
percent had  been used for  work conducted on  utilities. He                                                                    
explained  that the  bill would  not alter  or grow  the pie                                                                    
represented  on  slide  7. The  department  was  asking  the                                                                    
legislature  to   allow  DOL  to  include   matters  it  was                                                                    
currently doing before FERC. He  detailed that over the last                                                                    
couple of years DOL had tried  to control its costs a little                                                                    
more and it was bringing  work in-house on FERC matters that                                                                    
had  been   traditionally  done  by  outside   council.  The                                                                    
department  had reduced  its outside  council  fees by  very                                                                    
significant  amounts and  it was  trying to  build expertise                                                                    
and do the work in-house;  therefore, RAPA was spending more                                                                    
of its time  on matters coming before  FERC for Trans-Alaska                                                                    
Pipeline  System   (TAPS)  pipeline  tariff  work.   As  the                                                                    
department saw  its work in  the area growing, it  had found                                                                    
an opportunity to  amend the statute to allow  it to recover                                                                    
from  the RCC,  work  it was  currently  doing before  FERC.                                                                    
Currently, RAPA could  only recover money from  the fund for                                                                    
work that came before the RCA.                                                                                                  
9:38:23 AM                                                                                                                    
Mr. Sniffen explained the way  the cases usually worked. For                                                                    
example,  when pipeline  carriers  filed  a tariff  increase                                                                    
they were required to file it  with FERC and the RCA because                                                                    
there  was  an   interstate  and  intrastate  jurisdictional                                                                    
component.  An  interstate  tariff  paid  for  the  cost  of                                                                    
shipping  oil outside  of Alaska  and  an intrastate  tariff                                                                    
pertained to instate shippers taking  oil from the pipeline.                                                                    
Generally  the  RCA would  let  the  department litigate  an                                                                    
issue in  front of FERC and  when it was done  the RCA would                                                                    
generally  adopt  whatever  results  happened  in  the  FERC                                                                    
proceedings.  The  FERC  work directly  benefited  work  the                                                                    
department  would  otherwise  have  to do  before  the  RCA.                                                                    
Instead the  work was  done in front  of FERC  in Washington                                                                    
D.C. - the results of the  efforts flowed through to the RCA                                                                    
and intrastate  shippers. He explained it  may make referred                                                                    
to the  pie chart on slide  7 and noted that  the change may                                                                    
make the pipeline wedge of the  chart a bit bigger; it would                                                                    
result in a decrease in the  utility RCC because the pie was                                                                    
only so big.                                                                                                                    
9:40:10 AM                                                                                                                    
Representative Grenn  asked if the bill  would help decrease                                                                    
outside   counsel  costs.   Mr.  Sniffen   replied  in   the                                                                    
affirmative. For  example, DOL had paid  its outside council                                                                    
FERC attorneys something  like $90 million over  the last 30                                                                    
years. He recognized  it was a substantial  amount of money,                                                                    
but it  had returned  a multitude of  results and  the state                                                                    
had  saved   billions  of  dollars  because   of  that.  The                                                                    
department  was  taking   the  multi-million  dollar  annual                                                                    
contracts was  scaling them back substantially  by doing the                                                                    
work in-house. The  bill would enable the  department to pay                                                                    
for some of that work as  well. He detailed that the outside                                                                    
council contract  the previous  year had  gone from  over $1                                                                    
million  to about  $350,000. The  department  was trying  to                                                                    
economize where possible.                                                                                                       
Representative   Guttenberg   referred  to   Mr.   Sniffen's                                                                    
testimony that the pie was  not getting any larger. He noted                                                                    
that the  cap was statutory.  He asked what would  happen if                                                                    
major pipeline work  was going on in the  state. He remarked                                                                    
there would be  a "little advance on all of  that stuff." He                                                                    
asked if DOL would come back and ask for an adjustment.                                                                         
Mr.  Sniffen answered  in  the  affirmative. The  department                                                                    
would  seek some  General Fund  sources if  additional money                                                                    
was required.                                                                                                                   
Representative Guttenberg thought  the additional work would                                                                    
be paid  for by  receipt supported  services that  DOL could                                                                    
charge  to  someone else.  Alternatively,  he  asked if  the                                                                    
department would only be doing the state's position.                                                                            
Mr. Sniffen  responded that  the department  represented the                                                                    
state  on matters  before FERC  because the  results of  its                                                                    
work there also effected  the production taxes and royalties                                                                    
paid by the state. In the past the department had used one-                                                                     
time increment budgetary sources  to pay for outside council                                                                    
to help with the work.  However, if something went wrong and                                                                    
the department  had to litigate  to save the  state revenue,                                                                    
the department  would probably ask  for the funds in  a one-                                                                    
time appropriation.                                                                                                             
9:42:38 AM                                                                                                                    
Representative  Guttenberg  spoke  to  the  "all  utilities"                                                                    
portion  of the  pie  chart  on slide  7.  He  asked if  the                                                                    
reference  included  water,  sewer,  power,  telephone,  and                                                                    
other. Mr. Sniffen replied in the affirmative.                                                                                  
Representative Guttenberg  remarked that he had  been having                                                                    
discussions   about  the   issue  of   broadband  with   the                                                                    
department  for  some  time. The  issue  pertained  to  some                                                                    
positions the  RCA had with the  FCC [Federal Communications                                                                    
Commission]. He  had been told  that broadband work  was not                                                                    
under  RCA's domain.  He remarked  that they  had done  some                                                                    
things and he  wondered if they would  fall under incidental                                                                    
costs.  He  asked if  incidental  costs  were a  category  -                                                                    
relating to  things that did  not result in major  cases and                                                                    
were not time consuming.                                                                                                        
Mr. Sniffen believed  Representative Guttenberg was correct.                                                                    
However, he  corrected that he  would not specify  the issue                                                                    
as outside  the domain of  the RCA  - he believed  there was                                                                    
jurisdiction there. He expounded  that RAPA was focused more                                                                    
on rate  making cases and  advocating for consumers  who had                                                                    
to  pay  a  tariff.  The telecom  items  pertained  more  to                                                                    
licensing   and  other   things  that   the  RCA   had  some                                                                    
overlapping jurisdiction  in. He detailed that  RAPA did not                                                                    
really intersect  with the issue.  He agreed that  the issue                                                                    
was one  of the lesser things  that arose that did  not take                                                                    
much  of the  agency's attention.  He was  not aware  of any                                                                    
matter before the FCC that RAPA had been involved with.                                                                         
9:44:46 AM                                                                                                                    
Representative Guttenberg  noted he  would show  Mr. Sniffen                                                                    
the  documents.   He  was  trying   to  determine   who  had                                                                    
jurisdiction over broadband  rates. He wondered if  it was a                                                                    
utility or  in a public  utility or  not. He wondered  if it                                                                    
was  not regulated  at all.  He asked  who looked  after the                                                                    
public's  interest in  terms of  charges  and other  related                                                                    
items. He noted the issue could be discussed later.                                                                             
Vice-Chair Gara referred to slide  7. He had a concern about                                                                    
the  bill and  asked  Mr. Sniffen  to  discuss the  consumer                                                                    
function  at the  RCA. He  added an  aside that  he and  Mr.                                                                    
Sniffen had first met on opposite  sides of a [legal] case -                                                                    
he believed the state was  lucky to have Mr. Sniffen working                                                                    
at the  Attorney General's Office.  He discussed  that under                                                                    
the former Murkowski  Administration, the consumer function,                                                                    
where the state had represented  consumers on whether a rate                                                                    
increase was  proper, had  fallen under  the RCA.  There had                                                                    
been complaints and the consumer  function had been moved to                                                                    
the Attorney General's Office. He  asked for the accuracy of                                                                    
his statements.                                                                                                                 
Mr. Sniffen believed the explanation was fair.                                                                                  
Vice-Chair  Gara stated  there  had always  been a  consumer                                                                    
function because of the existence  of monopolies or close to                                                                    
monopolies; it  was necessary to  have regulation  to ensure                                                                    
the price  increases were reviewed  by someone. He  asked if                                                                    
his statements were fair.                                                                                                       
Mr. Sniffen answered in the affirmative.                                                                                        
Vice-Chair Gara  wanted consumers  to have  a voice  in rate                                                                    
setting.  He  was  concerned  that  the  public's  voice  on                                                                    
utility rate  increases may underrepresented if  the pie [on                                                                    
slide  7] did  not  grow  and more  in-house  work was  done                                                                    
related to  FERC. He  detailed that  the department  was not                                                                    
overloaded with staff.                                                                                                          
Mr.  Sniffen  responded  that the  question  was  fair.  The                                                                    
department had added staff to  the RAPA section to deal with                                                                    
pipeline  matters -  the position  was largely  paid out  of                                                                    
DOL's   budget.  He   stated  that   because  the   pipeline                                                                    
experience was going  to grow and potentially  tap into more                                                                    
of the RCC  - the cap could  grow a little - he  did not see                                                                    
it  as affecting  the  department's  ability to  effectively                                                                    
represent  consumers   as  zealously   as  it   always  had.                                                                    
Currently,  the department  did not  really know  what would                                                                    
happen from year-to-year  in terms of who would  file a rate                                                                    
case. The agency  was currently doing a couple  of big cases                                                                    
involving ML&P and Enstar that  was taking much of its time.                                                                    
The agency  was also doing  a bit  of pipeline work,  but it                                                                    
had  slowed down.  The agency  was  currently directing  its                                                                    
energy to  the utility  cases. In other  years there  may be                                                                    
more pipeline work  and less utility work.  He detailed that                                                                    
RAPA did  not control  when tariff filings  were made  - the                                                                    
department responded  to the filings  when they came  in and                                                                    
always responded when  the commission asked it  to. The bill                                                                    
would give flexibility  in the years where  there were fewer                                                                    
utility cases and  more pipeline work to  adjust its revenue                                                                    
sources  to compensate  the  agency for  work  done in  both                                                                    
sectors a  bit more  evenly. If  there was  a year  like the                                                                    
present  where RAPA  did not  have numerous  utility filings                                                                    
and it did  not spend much of its budget,  the funding would                                                                    
lapse. If in  the same year, there  was significant pipeline                                                                    
work,  RAPA would  be  unable to  recover  the lapsed  money                                                                    
because it did not have the authority to do so.                                                                                 
9:50:05 AM                                                                                                                    
Vice-Chair Gara surmised that the  department would be doing                                                                    
the same  amount of  work and  the bill  would give  it more                                                                    
flexibility to access  the fees coming in. He  noted that at                                                                    
present RAPA was using general funds  to pay for some of the                                                                    
pipeline  work. He  believed that  in a  lower utility  cost                                                                    
consumer protection  year and a  higher pipeline  cost year,                                                                    
the bill  would give  the agency  flexibility to  access the                                                                    
funds. He believed the amount  of money would be roughly the                                                                    
same  but  sometimes  the  general funds  would  go  to  the                                                                    
utility attorneys and sometimes it  would go to the pipeline                                                                    
Mr.  Sniffen replied  that the  department  would always  be                                                                    
doing the utility work as  contemplated by statute. Anything                                                                    
the agency  did before the  RCA could  be billed to  RCC; if                                                                    
the agency  ran out of  RCC funds and had  remaining utility                                                                    
work, it would still have to  do the work. In that case, the                                                                    
agency would  most likely request supplemental  funding. The                                                                    
funds had been  adequate to cover all of  the agency's needs                                                                    
thus far, but  in a year with more pipeline  work and a full                                                                    
plate of  utility work, the work  would get done one  way or                                                                    
another. The question would be who  would pay for the work -                                                                    
the  agency  would  most  likely  need  to  seek  additional                                                                    
Representative Kawasaki  asked about a recent  time when the                                                                    
consumer protection  unit [RAPA]  and the RCA  had disagreed                                                                    
on a  case. Mr. Sniffen  responded that  he did not  have an                                                                    
example on hand, but would follow up.                                                                                           
Representative Kawasaki spoke to  the process of RCA members                                                                    
being  submitted  by  the  governor   and  approved  by  the                                                                    
legislature  and  individuals  within  the  department  were                                                                    
generally  career individuals.  He was  interested in  cases                                                                    
when the department had a  disagreement with RCA rulings. He                                                                    
wondered what happened in that  case when the department was                                                                    
essentially fighting with itself.                                                                                               
9:53:10 AM                                                                                                                    
Mr.  Sniffen clarified  that DOL  had a  consumer protection                                                                    
unit  that was  different  from RAPA.  The agency  disagreed                                                                    
with the RCA frequently on  a variety of matters. The agency                                                                    
advocated  before  the  commission  on  certain  costs  that                                                                    
should or should not be  included in rates (e.g. bonuses for                                                                    
utility  representatives   and  other).  When   RAPA  argued                                                                    
against  something and  the commission  ruled  in favor,  it                                                                    
became commission  precedent and  RAPA would  decide whether                                                                    
it was worth  appealing. The agency had  recently appealed a                                                                    
matter  when  RCA  had ruled  against  involving  rate  case                                                                    
expense. He  detailed that one  of the odd things  about the                                                                    
process  was  the  utilities  got   to  roll  all  of  their                                                                    
litigation  fees and  money spent  to  bring a  case on  any                                                                    
issue into  their cost.  The utilities  had no  incentive to                                                                    
not litigate aggressively on every  issue because all of the                                                                    
costs  were  rolled into  rates.  The  agency had  stood  up                                                                    
against  the  concept in  a  recent  pipeline case  and  had                                                                    
communicated the  decision seemed odd, especially  in a case                                                                    
where there had  been a finding of  imprudence or something.                                                                    
He relayed  the case was  currently in appeal in  the Alaska                                                                    
Superior Court. There had been  tensions between the RCA and                                                                    
RAPA;  RAPA tried  to  act independently  on  behalf of  the                                                                    
public interest.                                                                                                                
Representative  Guttenberg spoke  about  a  Petro Star  Inc.                                                                    
case and Quality Bank issue.  He stated that the company had                                                                    
not  won the  case, but  received another  hearing over  the                                                                    
justification  for the  formula.  The courts  had ruled  the                                                                    
state did not  have standing, which he  found concerning. He                                                                    
elaborated  that  the  state represented  the  citizens  and                                                                    
there  could be  quite  a  bit of  money  in  terms of  rate                                                                    
paying.  He  believed Petro  Star  paid  around $25  million                                                                    
annually   into  the   Quality  Bank.   He  stated   that  a                                                                    
significant  change  would  impact consumers.  He  asked  if                                                                    
there was a difference between  the state's position and the                                                                    
public's position related to the outcome of the case.                                                                           
Mr.  Sniffen was  not entirely  familiar with  the case.  He                                                                    
added   that    he   shared    Representative   Guttenberg's                                                                    
understanding of  the situation. He thought  whether the way                                                                    
the Quality  Bank worked  impacted the  state to  the extent                                                                    
that  it should  have standing  to participate  in the  case                                                                    
versus  whether or  not it  was  arguing for  transportation                                                                    
costs  in the  pipeline, were  two separate  issues. He  was                                                                    
happy to have a conversation about the issue.                                                                                   
Representative Guttenberg commented that  he believed it was                                                                    
appropriate for the state to build the expertise in-house.                                                                      
9:56:55 AM                                                                                                                    
Mr.  Sniffen  concluded  the   presentation  with  slides  8                                                                    
through 12. He relayed that  the bill would not increase the                                                                    
cap, but  it would  give flexibility  for the  department to                                                                    
arrange its  caseload depending on  the cases received  in a                                                                    
given  year. Slide  9 addressed  how the  bill would  impact                                                                    
consumers, based on some questions  from the House Judiciary                                                                    
Committee  about how  pipeline shippers  who would  actually                                                                    
pay ultimately for the increased  pipeline charge. He stated                                                                    
it was  a small amount in  the greater scheme of  things for                                                                    
the shippers.  For example, adding $100,000  to the pipeline                                                                    
RCC for  the last  two quarters of  2016 would  increase the                                                                    
surcharge by 0.041  percent. He furthered that  on a $10,000                                                                    
billing there would be an additional $4.10 to the shipper.                                                                      
Mr.  Sniffen  turned  to  slide  10  and  relayed  that  the                                                                    
department was  trying to  save money  by bringing  the FERC                                                                    
work in-house.  Slide 12  conveyed that  the bill  would not                                                                    
impact AKLNG. He  moved to slide 12 and relayed  there was a                                                                    
check on  RCC spending. He  detailed that RCCs to  fund RAPA                                                                    
could  not   exceed  the   cap  without   the  legislature's                                                                    
permission. Second,  RAPA was required to  submit its budget                                                                    
annually  to  the RCA.  The  process  was public  where  any                                                                    
interested party could comment.                                                                                                 
9:59:12 AM                                                                                                                    
Vice-Chair  Gara  referred  to  a  question  raised  by  Mr.                                                                    
Sniffen  that he  found slightly  concerning. He  guessed he                                                                    
could  see the  argument  for  a utility  to  pass costs  to                                                                    
consumers from a  rate setting case it had  won; however, he                                                                    
did  not understand  how a  utility could  pass along  costs                                                                    
accrued  from  challenging a  rate  setting  and losing  the                                                                    
case.  He  asked  if  RAPA   made  the  distinction  in  its                                                                    
litigation. He  did not want  to make the bill  heavier, but                                                                    
he was concerned about the issue.                                                                                               
Mr.  Sniffen answered  that he  understood  the concern.  He                                                                    
stated that  he and  Vice-Chair Gara were  of the  same mind                                                                    
and  the courts  were not.  The issue  was a  frustration of                                                                    
RAPA's. He explained the precedent  seemed to be that if the                                                                    
challenge  was  legitimate  and  reasonable,  regardless  of                                                                    
whether there was  a win or loss, the  utility could recover                                                                    
the costs.                                                                                                                      
Vice-Chair  Gara surmised  the impact  seemed to  be whether                                                                    
RAPA could  use the  extra $40,000  [slide 7  indicated that                                                                    
RAPA's budget was  currently $40,690 under the  cap]. He was                                                                    
most concerned about the issue  raised by Mr. Sniffen, which                                                                    
he  wondered   about  addressing  in  the   legislation.  He                                                                    
surmised the governor  probably did not have  a position and                                                                    
the department was probably not  allowed to have a position.                                                                    
He  agreed  with  Mr. Sniffen's  statements  about  what  he                                                                    
believed was fair and what was not.                                                                                             
Mr.  Sniffen would  be happy  to discuss  the issue  later -                                                                    
perhaps in some other legislation.                                                                                              
Representative Guttenberg discussed  that when boroughs sued                                                                    
the state  and industry over  the TAPS valuation  issue, the                                                                    
costs incurred  by boroughs  went back  to its  citizens and                                                                    
the costs incurred by the  pipeline (i.e. Alyeska) went into                                                                    
the rate  making of  the state's  royalty and  severance. He                                                                    
asked for the accuracy of his statements.                                                                                       
10:02:15 AM                                                                                                                   
Mr. Sniffen asked for clarification on the question.                                                                            
Representative Guttenberg  clarified that  the state  did an                                                                    
evaluation of the pipeline, which  was litigated annually in                                                                    
court. When  the borough  was involved  in a  litigation the                                                                    
citizens paid for the costs.  When Alyeska was involved in a                                                                    
litigation he surmised the cost  was passed on to the state.                                                                    
He asked if his assessment was accurate.                                                                                        
Mr. Sniffen  responded that  he was  not certain.  He shared                                                                    
that the  cost Alyeska got to  include in its rates  was set                                                                    
by rate making  principles. He believed Alyeska  was able to                                                                    
include in  its costs the  cost to  defend the value  of the                                                                    
pipeline against  a tax increase  or property  tax valuation                                                                    
Representative Guttenberg  asked to  see a breakdown  of the                                                                    
information based on  whether a company won or  lost a case.                                                                    
Mr. Sniffen agreed.                                                                                                             
Co-Chair Seaton  spoke to  a problem  he anticipated  in the                                                                    
RCA.  He remarked  there seemed  to be  very high  executive                                                                    
compensation in some  of the coops and although  there was a                                                                    
board, it  was heavily  influenced by executives.  It seemed                                                                    
there  was  a potential  situation  where  there were  small                                                                    
coops with disproportionate  executive compensation bonuses.                                                                    
He was  trying to  determine if there  was potential  to set                                                                    
the  maximum   amount  of  executive  compensation   at  the                                                                    
governor's  salary  plus retirement  bonus  or  to use  some                                                                    
mechanism to tie compensation amounts  to some other manager                                                                    
in Alaska.  He continued  that most  of the  executives were                                                                    
managing  people,   they  were  not  tradespeople.   He  had                                                                    
received numerous  complaints from  people in coops  who had                                                                    
no method  of controlling the  issue. He asked if  the issue                                                                    
could be addressed.                                                                                                             
10:05:35 AM                                                                                                                   
Mr.  Sniffen   answered  that  executive   compensation  was                                                                    
something RAPA  struggled with when  it reviewed  rate cases                                                                    
from the coops. The current  standard was whether or not the                                                                    
compensation was  just and reasonable.  He shared  that RAPA                                                                    
did scrutinize  those things  to make  sure someone  was not                                                                    
over  compensated, which  could inflate  rates to  the point                                                                    
they became unjust  or unreasonable. A way  to maybe address                                                                    
limiting  that  could  be  through  commission  regulations.                                                                    
There may  be other  statutory fixes that  he would  have to                                                                    
think about.  He shared  the concern and  would be  happy to                                                                    
work on the issue.                                                                                                              
Co-Chair  Seaton  stated that  another  idea  that had  come                                                                    
forward  was that  tax  exempt coops  would  lose their  tax                                                                    
exempt  status  if  they  paid  executives  over  a  certain                                                                    
amount. He stated  that it would be in control  of the board                                                                    
to make  sure they  did not exceed  the just  and reasonable                                                                    
levels. He wondered if the idea had been considered.                                                                            
Mr. Sniffen replied  that the idea had  not been considered,                                                                    
but it could  be. He thought it may be  a way to incentivize                                                                    
the  smaller coops  to ensure  their executive  compensation                                                                    
was fair.                                                                                                                       
Co-Chair Seaton asked for Mr.  Sniffen to follow up with the                                                                    
Co-Chair Foster OPENED and CLOSED public testimony.                                                                             
10:08:24 AM                                                                                                                   
AT EASE                                                                                                                         
10:17:07 AM                                                                                                                   
[Representative Pruitt joined the meeting]                                                                                      
Co-Chair  Foster   believed  some  committee   members  were                                                                    
interested  in  moving  the bill  forward  and  others  were                                                                    
interested  in understanding  it more.  He relayed  that the                                                                    
bill  still needed  to  go to  the House  floor  and it  was                                                                    
towards the end of session,  so he suggested moving the bill                                                                    
Vice-Chair Gara addressed the one  zero fiscal note from the                                                                    
RAPA section  of DOL. The  department did not  anticipate it                                                                    
woud incur any extra cost.                                                                                                      
Representative Wilson  remarked that the bill  had only been                                                                    
received  the previous  evening. She  was not  very familiar                                                                    
with the  subject matter. She communicated  she would object                                                                    
to reporting the  bill from committee at  present, not based                                                                    
on its content, but because she needed more information.                                                                        
Co-Chair  Foster  understood the  issue.  He  was trying  to                                                                    
weigh all  of the issues  and hoped Mr. Sniffen  would reach                                                                    
out to committee  members who may have some  issues with the                                                                    
bill. In  the interest  of time he  relayed the  decision to                                                                    
move the bill would be put to a vote.                                                                                           
Representative  Pruitt  understood a  bit  of  the bill  and                                                                    
probably  supported  the  bill,  but he  would  support  his                                                                    
colleague  in   her  concerns.  He  wanted   to  ensure  his                                                                    
colleague had an  opportunity to have some  of her questions                                                                    
answered. He  understood they were  under a  tight schedule,                                                                    
however, there were some questions.                                                                                             
Vice-Chair  Gara  remarked  that  he  had  spoken  with  Mr.                                                                    
Sniffen, who  had relayed he  would have time to  spend with                                                                    
members if they  did not understand the  bill. He understood                                                                    
the concerns, but he believed the bill should move forward.                                                                     
Vice-Chair  Gara MOVED  to REPORT  HB 120  out of  committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
Representative   Wilson  OBJECTED.   She  stated   that  the                                                                    
[companion] bill  was in the Senate  Judiciary Committee and                                                                    
still  had  to  go  through the  Senate  Finance  Committee;                                                                    
therefore, she  did not believe  passing HB 120 was  a rush.                                                                    
She added  that now that  she understood what the  new rules                                                                    
were - that legislation would  come before the committee and                                                                    
be passed  out in  one meeting  - she  planned to  do things                                                                    
A roll call vote was taken on the motion.                                                                                       
IN FAVOR: Gara,   Grenn,  Guttenberg,   Kawasaki,  Thompson,                                                                    
Seaton, Foster                                                                                                                  
OPPOSED: Tilton, Wilson, Pruitt                                                                                                 
Representative Ortiz was absent from the vote.                                                                                  
The MOTION PASSED (7/3).                                                                                                        
There being NO further OBJECTION, HB 120 was REPORTED out                                                                       
of committee with a "do pass" recommendation and with one                                                                       
previously published zero fiscal note: FN1 (LAW).                                                                               
Co-Chair Foster addressed the schedule for the following                                                                        
10:23:27 AM                                                                                                                   
The meeting was adjourned at 10:23 a.m.                                                                                         

Document Name Date/Time Subjects
HB120 summary statement (03.31.17).pdf HFIN 4/6/2017 9:00:00 AM
HB 120
HB 120 - Presentation for House Finance (04.06.17).pdf HFIN 4/6/2017 9:00:00 AM
HB 120
HB114 Sectional Analysis 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 114
HB114 Sponsor Statement 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 114
HB121 Sectional Analysis 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121
HB121 Sponsor Statement 3.6.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121
HB121 Support Document - Federal memo to state plans 02.23.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121
HB141 - Supporting Testimony - Maniilaq Association.PDF HFIN 4/6/2017 9:00:00 AM
HB 141
HB121 Additional Document-Sponsor's Reply to House Judiciary Committee Questions 3.10.17.pdf HFIN 4/6/2017 9:00:00 AM
HB 121