Legislature(1993 - 1994)
04/25/1994 08:35 AM House FIN
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HOUSE FINANCE COMMITTEE
April 25, 1994
8:35 a.m.
TAPE HFC 94-140, Side 2, #000 - end.
TAPE HFC 94-141, Side 1, #000 - end.
CALL TO ORDER
Co-Chair Larson called the House Finance Committee to order
at 8:35 a.m.
PRESENT
Co-Chair Larson
Co-Chair MacLean Representative Martin
Vice-Chair Hanley Representative Navarre
Representative Brown Representative Parnell
Representative Grussendorf Representative Therriault
Representatives Foster and Hoffman were not present for the
meeting.
ALSO PRESENT
Robert Lohr, Executive Director, Alaska Public Utilities
Commission, Department of Commerce and Economic Development;
Jim Rowe, Alaska Telephone Association; Jim Jackson, GCI;
Gordon Parker, Anchorage Telephone Utility; Melphine
Reynolds, Chief Financial Officer, Anchorage Telephone
Utility; Jay Hogan, Contract Employee, House Finance
Committee.
SUMMARY INFORMATION
HJR 65 Proposing amendments to the Constitution of the State
of Alaska relating to the budget reserve fund.
HJR 65 was HELD in Committee for further discussion.
HB 539 "An Act extending the Alaska Public Utilities
Commission; and relating to regulation of public
utilities and to regulatory cost charges."
HB 539 was HELD in Committee for further discussion.
HOUSE JOINT RESOLUTION NO. 65
Proposing amendments to the Constitution of the State of
Alaska relating to the budget reserve fund.
Representative Martin stressed that the money received by
the state through settlement should be deposited in the
corpus of the Alaska Permanent Fund. He MOVED that "Budget
Reserve Fund" be deleted and "the corpus of the Alaska
Permanent Fund" be inserted on page 1, line 12.
Representatives Grussendorf and MacLean OBJECTED.
Representative Brown questioned if the amendment would be
germane to the legislation. She pointed out that the
amendment was not properly drafted. A roll call vote was
taken on the motion to adopt AMENDMENT 1.
IN FAVOR: Martin
OPPOSED: Brown, Grussendorf, Navarre, Parnell, Therriault,
Larson, MacLean
Representatives Hoffman, Hanley and Foster were absent from
the vote.
The MOTION FAILED (1-7).
Representative Brown interpreted that the legislation would
not effect current pay back owed to the Constitutional
Budget Reserve Fund. Co-Chair Larson agreed that the intent
of the legislation is not to effect debts owed prior to the
effective date. Discussion pursued regarding the addition of
an effective date to clarify that the legislation is not
retroactive.
Co-Chair Larson noted that the intent of the legislation is
to clarify there are no provisions for a simple majority
vote and no pay back provision.
Representative Brown asked what aspect of the pay back was
unacceptable to Judge Green. Representative Martin observed
that the Administration has the authority to pay back at the
end of the calendar year any money available to lapse.
JAY HOGAN, CONTRACT EMPLOYEE, HOUSE FINANCE COMMITTEE noted
that pending senate legislation includes a provision to
require the Governor to propose the amount for
appropriation. The amount would be the general fund balance
from the previous year.
Representative Grussendorf suggested that language be
inserted that states, "past debts owed to the Constitutional
Budget Reserve Fund are not effected by the passage of this
resolution." Members further discussed the adoption of a
effective date.
HJR 65 was HELD in Committee for further discussion.
HOUSE BILL NO. 539
"An Act extending the Alaska Public Utilities Commission;
and relating to regulation of public utilities and to
regulatory cost charges."
ROBERT LOHR, EXECUTIVE DIRECTOR, ALASKA PUBLIC UTILITIES
COMMISSION testified in support of HB 539. He recommended
that language be inserted after "may" to state, "do all
things necessary or proper, to carry out the purposes and
exercise the powers expressly granted or reasonably implied
in this chapter including" on page 1, line 10; and delete
"the powers of the commission shall be those specifically
conferred by statute or necessarily implied by a statutory
grant of authority.
JIM ROWE, EXECUTIVE DIRECTOR, ALASKA TELEPHONE ASSOCIATION
noted that the Association supports the change suggested by
Mr. Lohr. He stressed that the Association supports the
pursuit of competition on a federal level.
Representative Brown referred to provisions to change the
regulatory cost charge. Mr. Rowe noted concerns that the
costs or commission service allocated should be allocated
toward the utilities that are utilizing the time. He
observed that a compromise was reached to prevent the cost
of fuel for the electric would not be included in the
regulatory cost charge.
Representative Brown observed that the cost is being shifted
from one utility bill to another. She maintained that the
issue is how the total of the raised regulatory cost charge
should be spread and passed through on utility bills. She
did not feel that the change is necessary. Mr. Rowe
clarified that the Association is not suggesting the change.
Representative Grussendorf noted that the legislation
states: "If the legislature does so, the commission shall
reduce the total regulatory cost charge collected for that
fiscal year by a comparable amount." He suggested that the
state is subsidizing the utilities to give breaks to
consumers.
Mr. Rowe noted that the regulatory cost charge supports the
regulation of the APUC. He acknowledged that there is a
reallocation of cost.
Representative Brown maintained that competitive services
should not be charged against the regulated rate base. Mr.
Rowe discussed the possible effect of proposed federal
legislation.
DAVE HUTCHENS, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC
COOPERATIVE ASSOCIATION (ARECA) testified in support of HB
539. He expressed support for the language proposed by Mr.
Lohr. He referred to section 5. He noted that the APUC must
estimate how much money needs to be collected by the
regulatory cost charge. He explained that section 5 would
provide that any excess funds charged to the utilities by
the APUC would be carried over toward the regulatory cost
charge of the following year.
Mr. Hutchens discussed the regulatory cost charge
allocation. He maintained that the legislative auditor found
that more
money was charged to the electric than could be justified
based on the workload. He noted that the current proposal
would subtract from the electric revenues the cost of power.
He clarified that the cost of power is approximately 40 to
50 percent of total electric revenues.
Representative Brown provided members with AMENDMENT 1 (copy
on file). She MOVED to ADOPT AMENDMENT 1. She noted that
amendment 1 would delete sections 3, 4 and 12. The amendment
would delete sections that change the regulatory cost
charge. She spoke in support of retaining the status quo in
regards to the regulatory cost charge. She asserted that the
legislation does not address the regulatory cost charge of
oil or gas. She suggested that a complete cost accounting
would be preferable to the change contained in the
legislation. She asked why only one utility sector would be
allowed to adjust for cost of power.
Co-Chair MacLean OBJECTED to the adoption of Amendment 1.
Mr. Hutchens reiterated that the legislative auditor found
that more money was charged to the electric than could be
justified based on the workload. He noted that the
legislative auditor recommended a record keeping system as
the means to reallocate costs. The Commission objected to
his recommendation. The proposal to allow adjustment for the
cost of power was a compromise position.
A roll call vote was taken on the motion to adopt AMENDMENT
1.
IN FAVOR: Grussendorf, Navarre, Brown
OPPOSED: Hanley, Martin, Parnell, Therriault, MacLean,
Larson
Representatives Hoffman and Foster were absent from the
vote.
The MOTION FAILED (3-6).
(Tape Change, HFC 94-141, Side 1)
Representative Brown referred to "liberally construed." Mr.
Lohr noted that the language proposed for page 1, line 10
may be broader than current liberally construed language. He
reexpressed concern that the issuance of temporary operating
authority to utilities or interim refundability of rates may
be called into question as to whether they are in the scope
of the powers or duties of the Commission. He noted that
page 5, line 16 provides an effective date of 1995. The
Commission recommends that the effective date be changed to
July 1, 1996, to allow the Commission two years to propose
specific language to address any errors created by virtue of
the new language.
Mr. Lohr noted that the Commission has submitted a fiscal
impact note of $60.7 thousand dollars a year, beginning in
FY 96.
Mr. Lohr clarified that the new language may be broader in
some respects. He stressed that it is not clear what
problems the new language is solving. He emphasized that the
Commission not lose flexibility to address changes in
industry structure.
Representative Brown MOVED to ADOPT AMENDMENT 2. She noted
that the Amendment would delete the change to "liberally
construed" language. She emphasized that it is not clear
that a problem exists.
Representative Hanley recounted the concerns of industry in
regards to the "liberally construed" language. He stressed
that the APUC within the ~liberally construed" language, can
in regulation do things that they are not authorized by
statute to do. He noted that there is a potential to go way
beyond what is authorized in statute.
Representative Hanley noted that his mother is on the APUC.
Representative Brown noted the statute states that the power
of the Commission shall be liberally construed "to
accomplish it's stated purposes." She stressed that the
"stated purposes" limits the Commission's scope of
activities.
Mr. Hutchens observed that there has been occasions when
"liberally construed" was the standard used to address other
issues. He discussed a vote taken by the Commission
regarding environmental issues in regards to the feasibility
of the Healy Clean Coal Project's license to operate. He
stressed that the Commission should "follow the law not make
the law." He spoke in support of the legislation as drafted.
He discussed the Commission's use of "liberally construed"
to categorize lobbying expenses as campaign contributions.
Representative Navarre spoke in support of keeping the
current "liberally construed" language in statute.
Mr. Lohr noted that other states contain similar or equally
broad authorizing language.
Representative Navarre noted that the Supreme Court stated
in HEA versus City of Kenai that: "In sum, we have construed
AS 42.05.141(a)(1) to mean that the actual areas in which
the APUC may exercise its adjudicatory authority are quite
narrow. Within those narrow areas, however, the APUC's
powers to adjudicate are plenary, as broad as the specific
provisions of the act permit..."
Co-Chair MacLean spoke in support of language proposed by
Mr.
Lohr.
A roll call vote was taken on the motion to adopt AMENDMENT
2.
IN FAVOR: Brown, Grussendorf, Navarre, Larson
OPPOSED: Hanley, Martin, Parnell, Therriault, MacLean
Representatives Hoffman and Foster were absent from the
vote.
The MOTION FAILED (4-5).
Representative Hanley MOVED to ADOPT AMENDMENT 3, after
"may" insert "do all things necessary or proper, to carry
out the purposes and exercise the powers expressly granted
or reasonably implied in this chapter including" on page 1,
line 10; and delete "the powers of the commission shall be
those specifically conferred by statute or necessarily
implied by a statutory grant of authority."
Representative Brown stated that she supports the amendment
because she does not think it changes the scope of power of
the APUC. She stressed that it is not her intent to change
anything. Representative Navarre agreed that the amendment
would not change the scope of power of the APUC.
There being NO OBJECTION, AMENDMENT 3 was adopted.
Representative Martin MOVED to ADOPT AMENDMENT 4. Co-Chair
MacLean OBJECTED. Representative Martin explained that a
bonded indebtedness could result in the loss of the utility
if there is default on the bond. The amendment would prevent
the utility from being used as a collateral for the backing
of the bond.
Co-Chair MacLean spoke in opposition to the amendment. She
asserted that it would inhibit competition and services.
JIM JACKSON, GCI spoke in support of the amendment. He noted
that the amendment is the result of the announcement of the
Anchorage Telephone Utility (ATU) to invest millions of
dollars in the long distance and video dial tone businesses.
He noted that GCI is ATU's second biggest rate payer.
Mr. Jackson explained that municipal owned utilities were
given protection under AS 42.05.431. The statute states that
the APUC must set rates to assure that the bond covenant of
a municipally owned utility is never breached. He noted that
cooperative utilities were granted similar projections with
the check that new bond covenants must be approved by the
Commission before they go into effect. He asserted that the
provision would place rate payers as the guarantors of ATU's
competitive ventures. If ATU can go to the APUC for a rate
raise to cover its competitive losses.
Mr. Jackson noted that the amendment adds to statute that:
"Rates set by the commission must be adequate to meet those
covenants. However, the commission is not required to set
rates for services regulated by the commission to recover
the allocated costs and coverage requirements of services
that are not regulated by the commission. Bonds or other
debt issued to finance unregulated, competitive ventures by
a municipally owned utility may not be incurred in a manner
that would permit a creditor, on default, to have recourse
to the assets of the basic regulated utility business."
Mr. Jackson maintained that the amendment does not prevent
ATU from going into competition or issuing bonds. He noted
that the amendment only applies to regulated municipal
utilities.
In response to a question by Representative Brown, Mr.
Jackson discussed the effect of proposed federal
legislation.
MELPHINE EVANS REYNOLDS, CHIEF FINANCIAL OFFICER, ANCHORAGE
TELEPHONE UTILITY testified in opposition to amendment 4.
She gave a brief history of ATU's decision to enter into
competitive operations. She emphasized that technologies are
merging. She stressed that long distance companies are
entering into local markets. She noted that ATU desires to
participate in the information superhighway.
Ms. Reynolds stated that the amendment will have serious
consequences. She alleged that the amendment violates the
constitutional prohibition against passing legislation aimed
at a single entity.
Mr. Reynolds provided members with a letter by Public
Financial Management Incorporated regarding ATU's bond
rating (copy on file). She observed that they were advised
that ATU's bond rating could be reduced as a result of the
amendment.
HB 539 was HELD in Committee for further discussion.
ADJOURNMENT
The meeting adjourned at 10:10 a.m.
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