Legislature(1997 - 1998)
05/01/1998 01:20 PM House JUD
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE JUDICIARY STANDING COMMITTEE
May 1, 1998
1:20 p.m.
MEMBERS PRESENT
Representative Joe Green, Chairman
Representative Con Bunde, Vice Chairman
Representative Brian Porter
Representative Norman Rokeberg
Representative Jeannette James
Representative Eric Croft
Representative Ethan Berkowitz
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
* HOUSE BILL NO. 487
"An Act relating to including the costs of expansion activities and
political activities in rates of electric cooperatives."
- HEARD AND HELD
HOUSE BILL NO. 196
"An Act relating to wills, intestacy, nonprobate transfers, and
trusts; and amending Rule 24, Alaska Rules of Civil Procedure."
- PASSED CSHB 196(JUD) OUT OF COMMITTEE
SENATE BILL NO. 244
"An Act relating to polygraph or other lie-detecting testing for
certain correctional officers."
- PASSED SB 244 OUT OF COMMITTEE
CS FOR SENATE BILL NO. 158(L&C)
"An Act relating to motor vehicle liability insurance covering a
person who has had the person's driver's license revoked for
possession or consumption of alcohol while under 21 years of age."
- SCHEDULED BUT NOT HEARD
CS FOR SENATE BILL NO. 114(JUD) AM
"An Act relating to contributions from employee compensation for
political purposes; and prohibiting certain kinds of discrimination
against employees for political purposes."
- SCHEDULED BUT NOT HEARD
HOUSE BILL NO. 434
"An Act requiring drug testing for applicants for and recipients of
assistance under the Alaska temporary assistance program; and
providing for an effective date."
- REMOVED FROM AGENDA
(* First public hearing)
PREVIOUS ACTION
BILL: HB 487
SHORT TITLE: ELECTRIC COOP RATES: EXPANSION ACTIVITIES
SPONSOR(S): JUDICIARY BY REQUEST
Jrn-Date Jrn-Page Action
4/17/98 3041 (H) READ THE FIRST TIME - REFERRAL(S)
4/17/98 3041 (H) JUDICIARY, L&C, FINANCE
4/24/98 (H) JUD AT 1:00 PM CAPITOL 120
4/24/98 (H) MINUTE(JUD)
5/01/98 (H) JUD AT 1:00 PM CAPITOL 120
BILL: HB 196
SHORT TITLE: WILLS, TRUSTS, & OTHER TRANSFERS
SPONSOR(S): REPRESENTATIVES(S) RYAN, Therriault
Jrn-Date Jrn-Page Action
3/14/97 667 (H) READ THE FIRST TIME - REFERRAL(S)
3/14/97 667 (H) JUDICIARY, FINANCE
4/23/97 (H) JUD AT 1:00 PM CAPITOL 120
4/23/97 (H) MINUTE(JUD)
3/06/98 (H) JUD AT 1:00 PM CAPITOL 120
3/06/98 (H) MINUTE(JUD)
3/19/98 (H) FIN AT 1:30 PM HOUSE FINANCE 519
4/30/98 (H) MINUTE(JUD)
BILL: SB 244
SHORT TITLE: POLYGRAPHS FOR CORRECTIONAL OFFICERS
SPONSOR(S): SENATOR(S) WARD, Taylor
Jrn-Date Jrn-Page Action
1/16/98 2217 (S) READ THE FIRST TIME - REFERRAL(S)
1/16/98 2217 (S) STA, JUD
2/17/98 (S) STA AT 3:30 PM BELTZ ROOM 211
2/17/98 (S) MINUTE(STA)
2/18/98 2561 (S) STA RPT 3DP 1NR
2/18/98 2561 (S) DP: GREEN, MILLER, WARD NR: DUNCAN
2/18/98 2561 (S) ZERO FISCAL NOTE (COR)
4/06/98 (S) JUD AT 1:30 PM BELTZ ROOM 211
4/06/98 (S) MINUTE(JUD)
4/07/98 3177 (S) JUD RPT 4DP 1NR
4/07/98 3177 (S) DP: TAYLOR, PARNELL, MILLER, PEARCE
4/07/98 3177 (S) NR: ELLIS
4/07/98 3178 (S) PREVIOUS ZERO FN (COR)
4/08/98 (S) RLS AT 11:20 AM FAHRENKAMP RM 203
4/08/98 (S) MINUTE(RLS)
4/08/98 3199 (S) RULES TO CALENDAR 1NR 4/8/98
4/08/98 3200 (S) READ THE SECOND TIME
4/08/98 3200 (S) ADVANCED TO THIRD READING UNAN
CONSENT
4/08/98 3200 (S) READ THE THIRD TIME SB 244
4/08/98 3200 (S) PASSED Y19 E1
4/08/98 3205 (S) TRANSMITTED TO (H)
4/09/98 2936 (H) READ THE FIRST TIME - REFERRAL(S)
4/09/98 2936 (H) STATE AFFAIRS, JUDICIARY
4/21/98 (H) STA AT 8:00 AM CAPITOL 102
4/21/98 (H) MINUTE(STA)
4/21/98 3133 (H) STA RPT 1DP 3NR
4/21/98 3133 (H) DP: JAMES; NR: IVAN, RYAN, HODGINS
4/21/98 3133 (H) SENATE ZERO FISCAL NOTE (COR) 2/18/98
5/01/98 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
JEFF LOGAN, Legislative Assistant
tp Representative Joe Green
Alaska State Legislature
Capitol Building, Room 118
Juneau, Alaska 99801
Telephone: (907) 465-6841
POSITION STATEMENT: Presented HB 487 on behalf of the House
Judiciary Committee.
GENE BJORNSTAD, General Manager
Chugach Electric Association
5601 Minnesota Drive
Anchorage, Alaska 99519
Telephone: (907) 762-4708
POSITION STATEMENT: Testified on HB 487.
GARY BROOKS, Business Manager
International Brotherhood of Electrical Workers
2702 Denali Street
Anchorage, Alaska 99503
Telephone: (907) 272-1547
POSITION STATEMENT: Testified on HB 487.
BRUCE SCOTT, Director
Member-Public Relations
Matanuska Electric Association
163 East Industrial Way
Palmer, Alaska 99645
Telephone: (907) 745-3231
POSITION STATEMENT: Testified on HB 487.
SAM COTTON, Chairman
Alaska Public Utilities Commission
1016 West 6th Avenue
Anchorage, Alaska 99501
Telephone: (907) 276-6222
POSITION STATEMENT: Testified on HB 487.
ERIC YOULD, Executive Director
Alaska Rural Electric Cooperative Association
703 West Tudor Road
Anchorage, Alaska 99503
Telephone: (907) 463-3636
POSITION STATEMENT: Testified on HB 487.
REPRESENTATIVE JOE RYAN
Alaska State Legislature
Capitol Building, Room 420
Juneau, Alaska 99801-1182
Telephone: (907) 465-3875
POSITION STATEMENT: Presented HB 196.
RICHARD THWAITES, Chairman
Alaska Trust Company
500 L Street, Suite 301
Anchorage, Alaska 99501
Telephone: (907) 277-1595
POSITION STATEMENT: Testified on HB 196.
CRAIG JOHNSON, Legislative Administrative Assistant
to Senator Jerry Ward
Alaska State Legislature
Capitol Building, Room 423
Juneau, Alaska 99801
Telephone: (907) 465-4921
POSITION STATEMENT: Presented SB 244 on behalf of sponsor.
ACTION NARRATIVE
TAPE 98-79, SIDE A
Number 0001
CHAIRMAN JOE GREEN called the House Judiciary Standing Committee
meeting to order at 1:20 p.m. Members present at the call to order
were Representatives Green, Bunde, Rokeberg, James and Croft.
Representatives Berkowitz and Porter arrived at 1:30 p.m. and
2:04 p.m., respectively.
HB 487 - ELECTRIC COOP RATES: EXPANSION ACTIVITIES
Number 0069
CHAIRMAN GREEN announced the first item on the agenda was HB 487,
"An Act relating to including the costs of expansion activities and
political activities in rates of electric cooperatives." He said
the meeting was being teleconferenced. He asked Jeff Logan to come
before the committee to present HB 487.
Number 0142
JEFF LOGAN, Legislative Assistant to Representative Joe Green,
Alaska State Legislature, stated the House Judiciary Committee
sponsored HB 487 which is a simple bill with a straightforward
goal; to make sure that consumers have a voice with a choice. He
said in other states deregulation and restructuring in the electric
utility industry is being driven by both politics and economics.
No one has a clear picture yet of what will happen in Alaska, but
in anticipation of change, it is his belief that ratepayers should
be part of the process. The bill addresses both political
activities and expansion activities and says that before a
cooperative (co-op) can use money collected from rates for these
activities, the cooperative must first advise the ratepayer what
portion of the rate will be used for such activities. Then, the
co-op must identify how much of the rate would be used for that
purpose. Then the co-op must make sure the ratepayer knows that
they can't be retaliated against for failing to consent and then
must get that consent. Further, the bill defines expansion
activities as trying to attract customers of another utility and
defines political activities as advocating for or contributing to
a political position or candidate or advocating for a policy issue
not directly related to the core services of the utility.
MR. LOGAN explained there are restrictions currently in place
against using rate monies for some political purposes. This issue
has been considered before by the legislature. When AS 42.05.381,
which this legislation would amend, was originally enacted, it
required only that rates be just and reasonable, as determined by
the Alaska Public Utilities Commission (APUC). In 1976, it was
amended to require the commission to specifically omit certain
expenditures related to advertising and public relations. The
Alaska Public Utilities Commission has also considered the use of
rate monies for political activities. He noted that Chairman, Sam
Cotton, was on-line from Anchorage to answer questions related to
the commission's actions.
MR. LOGAN noted the Alaska Supreme Court has considered this issue
in Homer Electric Association v. APUC. He stated this legislation
is simply asking the legislature to establish a simple policy.
Number 0397
REPRESENTATIVE CON BUNDE noted that Mr. Logan had mentioned in the
sponsor statement elections held by utility companies. He recalled
the Chugach Electric Association of which he is a member, has
notoriously low turnouts and provides entertainment and give away
prizes to get people to show up at the annual meeting. And now
this legislation adds a requirement they get people to participate
at yet another level before they could be involved in these
activities. He asked if this could end up being a de facto;
keeping them from participating in activities because there will be
such a low level of participation.
CHAIRMAN GREEN remarked that some time back, the Chugach Electric
Company passed a bylaw which allows members to vote by mail which
has been the prime mover for reducing the number of people
attending the annual meeting. Even before that action, they quit
having entertainment as an inducement for attendance. He ventured
a guess that 95 - 97 percent of the members vote by mail; very few
members attend the annual meeting for voting and the idea behind
this was that a co-op by its very nature was instituted to provide
an ability to electrify homes that were not part of a municipality.
It seems somewhat incongruous that a co-op by its very nature then
would be involved in advertising politically or being in a
competitive arena like privately owned co-ops are in the Lower 48.
It is his belief that we have lost sight of the purpose of a co-
operative electric company by the activities that are happening in
some areas. He said this is a method of actually getting back to
the original co-ops in the early 30s.
Number 0565
REPRESENTATIVE BUNDE said, "I understand the thrust behind the
bill, but I still go back to my original question - what level of
participation do they have now and what level of participation do
you expect would be required to -- if only 30 percent fill out
these cards, that's the 30 percent of people's money they can use
and as they're managers, managing as they see fit including their
political activity.
CHAIRMAN GREEN noted this does not require approval of the members;
it says it requires notification so the members of the co-op know
how the money is being spent and do they accept the fact that money
is going to be spent not on generating or supplying electricity,
but rather something political or securing outside (indisc.).
REPRESENTATIVE BUNDE pointed out that item 4 of the sponsor
statement says "receives the consent of the member".
Number 0636
MR. LOGAN stated, "As originally envisioned or discussed, we had
thought that on the bill itself - everybody gets the bill - on the
bill itself there could be a checkoff or a box that shows that in
order to generate and transmit the electricity to your house it
costs $10.00 and it costs $3.00 for political activities and $1.00
for expansion activities and do you concur with this and if you
did, you could check off or punch a hole in like a ballot or put
your initial - something like that. And if you did, then you pay
the full rate; if you don't, you pay the lesser rate. Or you
could, with your bill at the beginning of the year, they could say
we anticipate a budget throughout the year of "x" amount of
dollars, we have "x" number of members, we anticipate we would have
to charge each member $10.00 a month for political or expansion
activities, do you agree? And you could check off yes or no.
Number 0706
REPRESENTATIVE BUNDE restated his concern about what level of
activity could be reasonably expected when there's less than 40
percent of the population voting in general elections.
Number 0723
REPRESENTATIVE JEANNETTE JAMES said she shared some of the same
concerns as Representative Bunde, in addition to some of her own.
She said an analogy would be the issue of a person having to agree
to their address being given out by the Division of Motor Vehicles
for mailing lists. She always says "no" when asked if she wants to
do that. Likewise, if someone asks her if she wants to pay extra
for this, her response is going to be "no." So, she thinks the de
facto that Representative Bunde is talking about is very real. She
said, "My other concern that I have - and I'll ask you if you've
thought this out thoroughly - is whether or not in today's age we
have the same need for the co-op that we had when we first got them
because that's monopoly time and in order to get electricity or
whatever, that was the good method to be able to put together the
funds and get support and it was a requirement by the money that we
used to be a cooperative - is it coming into an age where
competition with cooperatives might be an oxymoron and that we
ought not to have cooperatives in competition, but we should have
a different kind of structure."
Number 0820
MR. LOGAN remarked he would answer the questions in reverse order.
As to the second question, he said that was far beyond the scope of
the bill and he really didn't have a response to it. With regard
to the first question, if a member voted no just because they
didn't want to pay the extra money, that's exactly what the bill is
designed to do.
Number 0850
REPRESENTATIVE ERIC CROFT remarked that currently an electric
cooperative might be able to use this money for political activity
and as a ratepayer, what would he do if he objected to the use of
his money to advocate positions that he didn't favor.
MR. LOGAN said there are two principal avenues available to address
that concern: First would be to address the board of his
particular co-op, find out the position of candidates running for
the board and hold them accountable with his vote; second, would be
to file some type of action with the public utilities commission.
Number 0906
CHAIRMAN GREEN asked if there were other questions of Mr. Logan?
Hearing none, he asked Gene Bjornstad, General Manager of Chugach
Electric to present his comments via teleconference.
Number 0950
GENE BJORNSTAD, General Manager, Chugach Electric Association,
testifying via teleconference from Anchorage, said Chugach Electric
has approximately 55,000 consumer members. Recently Chugach
Electric conducted a survey of the Anchorage legislative districts
and asked its members, "Do you want the ability to choose your
electric power supplier?" He said the results were overwhelmingly
in favor by percentages ranging up to 95 percent. The people of
Anchorage want choice of and competition between the electric
utilities in Anchorage. He stated Chugach Electric recognizes that
other factions and organizations do not want competition to occur.
It is Chugach Electric Association's opinion that HB 487 obviously
is designed to prohibit competition. He said, "If that is what
you, as a legislator intends, there's much simpler ways to attempt
that - just propose a bill to prohibit competition and vote it up
or down. But if you believe that competition does result in better
service, introduction of new technology and innovative ideas, then
you should defeat House Bill 487 and allow all the residents of
Anchorage to realize the benefits." He further stated this bill
clearly would prohibit the marketing and publication of new
products and services and (indisc.) for political positions in
public issues dealing with competition. If the legislature passes
this bill, it must consider the real possibility of outside
organizations and corporations having a distinct advantage to
market and advocate their own service product positions in Alaska.
This legislation will severely disable all electric cooperatives,
not just Chugach Electric, to compete. He stated, "Chugach has the
right, and I believe the obligation, to be able to tell our story.
That story is our members should have the ability to choose their
supplier."
MR. BJORNSTAD further stated Chugach Electric Association has
stated a number of times to the legislature, to the Alaska Public
Utilities Commission and in a number of other forums that the APUC
has the authority to stop competition if it decides it's not in the
public interest. The critical point, however, is that it has to be
occurring before it can be stopped. Passage of this legislation
will prevent it from occurring. The title of HB 487 suggests that
all 55,000 Chugach Electric consumers have to consent to the cost
expansion activities, political activities and the rates of
electric cooperatives. He said Chugach Electric believes this is
counter productive in the deregulation of the electric utility
industry.
Number 1139
CHAIRMAN GREEN asked if the Chugach Electric Association was
currently operating efficiently?
MR. BJORNSTAD replied in his opinion Chugach Electric is operating
efficiently, but that's not to say there isn't room for
improvements.
CHAIRMAN GREEN inquired if it wasn't the charge to operate it as
efficiently as possible for the member owners.
MR. BJORNSTAD agreed that was the charge.
CHAIRMAN GREEN asked, "Would it be reasonable to think then that
you could actually then, if there was competition, that you could
somehow reduce the rates and still maintain your activities,
wouldn't you then go in a deficit spending mode?"
MR. BJORNSTAD didn't believe so.
Number 1177
CHAIRMAN GREEN stated, "Somehow I don't find those two statements
compatible. If you reduce your income, you're operating as
efficiently as you can, how can you reduce the income and not go in
the red?" He didn't want to engage in debate, but he's concerned
about the statement that the only way we're going to have reduced
rates is through competition and he thought the charge of the board
of directors and the administration of the cooperative was to
operate in the most efficient manner possible. He added, "And if
on the other hand, you were going to seek outside entities to come
into the fold through some sort of a discounted rate - in other
words, giving them electricity as a lesser rate than the average -
then the people that would have to make up that difference seems to
me would be ratepayers - the individual households - that does not
seem in the best interest of the majority of the consumers."
MR. BJORNSTAD responded that Chugach wasn't planning to market its
products at below cost, but he thought they intend to market new
services which this bill would prohibit new services. He noted
Chugach Electric has implemented a number of services for consumers
in the last six months and advertising was required to do so.
CHAIRMAN GREEN said Chugach Electric had a rate schedule for
industrial consumers and a higher rate schedule for home owners, so
if Chugach goes out and gets more industrial consumers, the balance
will have to be made up by individual households.
MR. BJORNSTAD said he didn't understand Chairman Green's statement.
CHAIRMAN GREEN reiterated, "If it cost "x" amount of money to
generate "y" amount of electricity and you're going to try and get
more low cost commercial users - high volume, low cost commercial
users - the difference in the average cost to generate and the
price that you're going to give them is going to have to be made up
by somebody and isn't that somebody the individual households that
don't get this volume discount?"
MR. BJORNSTAD replied, "No, I don't believe that's a correct way to
state it. A larger load spread over the same number of consumers
or more income spread over the same number of consumers are going
to be able to be applied to our fixed costs."
Number 1385
REPRESENTATIVE NORMAN ROKEBERG referred to page 2, line 7, relating
to political activities and asked if Mr. Bjornstad objected to this
portion of the bill and would that have any impact on the ability
to get people interested in coming to the annual meetings.
MR. BJORNSTAD said he believed Chugach Electric would object to
that. He added, "I think there's things that Chugach would like to
advocate to the legislature that probably (indisc.) the definition
of political activity."
Number 1414
REPRESENTATIVE ROKEBERG asked, "Given the statutes you work under
relative as an electrical cooperative, under state law and federal
law, is there an ability of an investor-owned company that would
have the ability to take you over by offering your membership
consideration or dollars for their membership equity?"
MR. BJORNSTAD said he believed it was possible for that to happen.
Number 1433
REPRESENTATIVE CROFT inquired if Chugach Electric currently
conducts political activity, as defined in HB 487, with ratepayer
money.
MR. BJORNSTAD responded, "I guess I'm not certain what's in the
bill as far as advocating for a public policy issue not directly to
core services - I guess we're all vague as what people mean by core
services of the utility."
REPRESENTATIVE CROFT said it seemed to him it's the generation and
transmission of electrical power.
MR. BJORNSTAD inquired about the retail services.
REPRESENTATIVE CROFT asked if Chugach Electric provides retail
services?
MR. BJORNSTAD replied, "Yeah, we have building arrangements; we do
energy audits for our customers; things of that nature - I guess,
is that core service or not?"
REPRESENTATIVE CROFT said that sounds like a core service to him,
but he wondered if Chugach Electric was doing some of the others
under (2)(A) or (B) - advocating using ratepayer money for
political positions or for a particular candidate.
MR. BJORNSTAD asked if Representative Croft was referring to a
position that a candidate would have.
REPRESENTATIVE CROFT responded yes, or a public policy issue not
related to the generation and transmission of electrical services.
MR. BJORNSTAD said he wasn't certain some of the things Chugach
Electric was currently doing would fall into this definition.
REPRESENTATIVE CROFT said he didn't know either, but it seemed to
him that if it was being done with ratepayer money, it shouldn't be
and if not, then this bill doesn't really affect them. His concern
is that ratepayers don't have any effective way of saying they
don't want their money used for advocating a particular position or
used for a particular form of speech.
Number 1541
REPRESENTATIVE BUNDE asked if Chugach Electric advocates, comments
on or advertises for or against political candidates or just
candidates for the board of Chugach Electric?
MR. BJORNSTAD replied that Chugach Electric doesn't advocate for or
against a candidate for an office; Chugach Electric does advertise
the candidates that are for the director positions at Chugach
Electric.
Number 1590
MR. LOGAN said on a technical point in response to something Mr.
Bjornstad suggested; that being that under this legislation all
55,000 members would have to agree in order to spend any money for
political expense and activities, he had a discussion about that
topic with the drafter of the legislation and it is her intent and
opinion that that is not the case. He added, "The intent was that
if there are 55,000 members in the association and the board
determined they wanted a budget for political activities and
offered on some statement that over the next year every member
would be charged $1.00 for that and 25,000 members checked no on
the box, that would leave 30,000 members saying yes at a dollar a
piece, that would mean the board would have $30,000 to use for
their budget for political activities. It doesn't mean that they
can't conduct any political activities; only that they can conduct
those activities with the money approved by the membership who
agrees to do it."
MR. BJORNSTAD countered that if the legislation doesn't speak to
that particular method, would marketing new services or new
activities work the same way.
MR. LOGAN said only if those activities fell under the definitions
established in the legislation.
MR. BJORNSTAD asked, "So expansion activities then would be the
same way - you have to have a checkoff from the consumer to market
anything else?"
MR. LOGAN replied if it fell under the definition of attracting
customers of another electric cooperative.
Number 1685
MR. BJORNSTAD asked if that would also mean advertising or
combating competitions from a (indisc.) marketer who is not an
electric utility?
MR. LOGAN said he didn't have the answer, but suggested Mr. Cotton
may be able to addressed that particular question.
Number 1712
REPRESENTATIVE JAMES said, "My question is in paragraph (h) under
Section 1, when it is telling about the expansion activity - and
there was a question a little earlier too about your responsibility
to your members - it would seem to me like - and we're talking
about expansion activity - it seems to me like if you had the
calculation of expanding your membership to large users of power
that there might be some benefit from volume and therefore, you
wouldn't be spending money, you'd be reducing -- you might spend
money to reduce their rates. Could you respond to that?"
MR. BJORNSTAD said that Chugach Electric has not targeted just
large, industrial customers. It is their position to serve anyone
who wants to get served, but if they were to get new load, that
load with the revenues would reduce the cost for other people.
REPRESENTATIVE JAMES remarked that by getting in more customers,
Chugach believes that the rate per customer would be less and would
still make sufficient profit to keep the cooperative operating.
MR. BJORNSTAD said that was correct.
Number 1780
CHAIRMAN GREEN asked if increasing the number of kilowatts
generated would require more fuel.
MR. BJORNSTAD replied yes, it would.
CHAIRMAN GREEN asked if all of Chugach Electric fuel contracts were
at the same price?
MR. BJORNSTAD said no.
CHAIRMAN GREEN asked, "If you used more fuel, would that fuel --
the more fuel you used, would that be more expensive than the other
fuel that you were using?"
MR. BJORNSTAD said the rate is blended for the fuel contracts and
he's not certain that fuel coming from one contract could be
identified from that coming from another contract. It's still a
blended rate, so he didn't think they could increase their fuel
cost just by having another customer.
Number 1818
CHAIRMAN GREEN rephrased his question, "If you were going to
increase your rate 10 percent, your consumption -- would 10
percent come from each of your existing contracts evenly or would
there perhaps be, as one would surmise, your later contracts would
supply more of the additional fuel? What I'm getting at is I'm
wondering if it necessarily follows that because you make more
power, you can necessarily reduce the cost to everyone?"
MR. BJORNSTAD replied, "One of our fuel contractor's fuel price is
the highest of our blend - our contract and that's one of our
original fuel suppliers. The latest fuel supplier we have their
rates are lower than that one."
CHAIRMAN GREEN asked how the mix is now. He added it doesn't seem
prudent that Chugach Electric would blend in high cost gas now if
you don't need high cost gas.
MR. BJORNSTAD said the contract specifies they get 60 percent of
their fuel from one supplier and 40 percent the other three
suppliers.
Number 1881
REPRESENTATIVE ETHAN BERKOWITZ asked how much Chugach Electric
invests in expansion activity and political activity as it's
defined in HB 487.
MR. BJORNSTAD said he couldn't answer off the top of his head.
However, he suspected their marketing activities in the last year
were probably $100,000 and political activities were probably
$50,000 which includes trips to Juneau to advocate their position
on competition.
REPRESENTATIVE BERKOWITZ observed that would be roughly $3 per
member, assuming the activities fall under the definition in
HB 487. He inquired if it would create a hardship to have a
checkoff on the billing statement.
MR. BJORNSTAD didn't think that would create much of a problem.
Number 1955
CHAIRMAN GREEN asked if there were further questions for Mr.
Bjornstad. There being none, he asked Gary Brooks to present his
comments at this time.
Number 1960
GARY BROOKS, Business Manager, International Brotherhood of
Electrical Workers, testified via teleconference from Anchorage on
behalf of the over 1,000 members and families that make their
living in the utility industry in Alaska and on behalf of the
approximately 5,000 members who are consumers of electricity, the
IBEW views this legislation as positive for the consumers and
members who work in the industry. He added, "Throughout this
industry in the Lower 48 states, we the IBEW work force, have been
hit hard by rapid, radical restructuring of the electric power
provider industry, only to later see these impacts reversed. In
California, for example, years before any actual restructuring
policy, thousands of employees were laid off in the name of
competition, downsizing and preparedness for the eventuality of
restructuring. When powerful storms hit the West Coast knocking
out power systems statewide, the utility industry found itself
completely unprepared to respond. In parts of the state, consumers
went without power for more than a month." He said Alaska cannot
afford to take that risk. California has the luxury of a much
milder climate as well as the (indisc.) component of an inter-
connected power bridge. Adding to the personal pain of the workers
who were downsized out of jobs, lifetime careers were eliminated,
workers were forced to relocate to other parts of the country,
college educations were postponed and families were disrupted only
to be reversed by the state's utility commission who reacted to the
public complaints and ordered the utilities to re-man themselves.
In the meantime, (indisc.) were shutdown, workers moved away and
even today, three years later, an open call to power lineman
remains hanging on his bulletin board offering to pay moving
expenses and signing bonuses for any lineman willing to relocate in
California.
MR. BROOKS said, "We hope to learn from this lesson and the lesson
of the Northeast who recently went through much the same thing
after disastrous ice and snowstorms this past winter." He said the
IBEW is not opposed to restructuring of the electric utility
market, but they ask that any restructuring answer basic
fundamental questions about universal access, job safety, large
load cherry picking, recovery of stranded cost, cost to consumers,
system reliability and market dominance, to name just a few. The
IBEW is hopeful the final policy will adequately address these
issues, but in the meantime they urge the legislature to consider
enacting this legislation so that good public policy can be enacted
without the hysteria that may otherwise be seen and has already
been witnessed in other parts of the country.
Number 2133
REPRESENTATIVE CROFT asked when the IBEW conducts political
activities such as described in HB 487, can that be done with dues
or does it require a similar type of checkoff.
MR. BROOKS said their political action is governed by the Alaska
Public Offices Commission and requires voluntary contributions.
REPRESENTATIVE CROFT said there had been some concern expressed
that a check off would result in low participation and wondered if
any of the 1,000 plus members of the IBEW make that election.
MR. BROOKS replied yes, the IBEW has a very active membership.
Number 2175
REPRESENTATIVE BUNDE surmised that IBEW members need to check off
before any money is collected. Their members also need to hire out
of the union hall, which allows the opportunity to speak with them
personally before they check off; however, in this case a bill
would be sent out that may or may not be looked at with no personal
involvement in the checkoff. He asked if that was the difference
between what transpires with IBEW members and what would transpire
with this legislation.
MR. BROOK said that could be one argument, but the fact exists
there was a large number of employees employed long before the
Alaska Public Offices Commission was created and regulated
political activity and the IBEW was still able to communicate with
the existing employees, offering their services and got voluntary
compliance. He did not dispute that construction personnel when
receiving a job call, are offered the opportunity to participate in
the package.
Number 2232
REPRESENTATIVE JAMES said, "I don't know whether this is a question
for the gentleman from IBEW or if it's a question for the sponsor,
but on this political activity, my concern is - and I know what the
rule is with APOC as to who can contribute to a candidate - and I
need to know why this is in here because it's only individuals that
can and political action committees (PAC) can and in order for
money to go into a political action committee such as we heard from
the gentleman from IBEW, they have to agree - the members have to
agree to that amount going in. Now my question is, does this bill
then include the idea that what can't be happening now - there can
be no contribution to a candidate or a political issue from the
cooperative unless it was a membership PAC from the employees or
something. I don't believe there's any ability for them to create
a PAC with contributions from the membership unless they do have
permission from them to do that. Is that what this bill is
allowing to happen - that if people agree, then a part of their
rates that they pay can be put into a PAC to be given to a
candidate? If that's the case, I'm not interested in opening that
door."
MR. BROOKS replied that he wasn't the best person to answer that
question.
Number 2297
REPRESENTATIVE CROFT said on that point, this is shutting the door
tighter, so it would be that these activities couldn't take place
without the approval of the membership. Right now the worry would
be that a PAC could be set up with ratepayer money.
REPRESENTATIVE JAMES said it's not allowed under the APOC rules.
CHAIRMAN GREEN said the committee would next hear testimony from
Bruce Scott.
Number 2340
BRUCE SCOTT, Director, Member-Public Relations, Matanuska Electric
Association (MEA), testified via teleconference from the Mat-Su
Legislative Information Office. He said the Matanuska Electric
Association has 29,000 members in Southcentral Alaska. He said
this bill seems to expand the definition of political activity to
such an extent that it would jeopardize MEA's ability to
communicate with their members. For example, if MEA could not
advocate for a public policy issue not directly related to the core
services of the utility, does this mean that a co-op could not
purchase political advertising to defend the co-op from a hostile
takeover by another (indisc.)? He asked if it would prohibit
economic development activities since (indisc.) creating new
business is not their core business? If MEA had a proposed bylaw
on their ballot, wouldn't this legislation prevent MEA from trying
to convince members to pass the bylaw for what the board felt was
the good of the association? He said MEA lobbied their members in
1994 and 1995 to pass bylaw measures that would strengthen the co-
op and made it harder for the co-op to be taken over. It received
overwhelming consent of their members. He said MEA recently ran a
series of articles in their member newsletter about the costs
incurred due to the activities of the IBEW which they believed was
waging a (indisc.) campaign at MEA (indisc.-tape garbled). He said
the IBEW apparently orchestrated a campaign to silence the
newsletter by lodging some two dozen complaints with the APUC. It
is his understanding this legislation would accomplish that
(indisc.) because sharing that kind of information with their
members at a cost of about $250,000 a year to defend themselves for
this kind of activity might be prohibited under this law. In
conclusion, he said more than 1,200 people attended MEA's annual
meeting last month and more than $7,600 was received. Matanuska
Electric Association is a member-owned co-op and they want to keep
it that way.
CHAIRMAN GREEN asked if Matanuska Electric Association members have
the option of mailing their ballots in or do they have to attend
the meeting?
MR. SCOTT said members can either mail their ballots or go to the
meeting.
REPRESENTATIVE BERKOWITZ asked roughly how much does the MEA expend
on expansion activity and separately on political activity based on
the definitions under this bill.
TAPE 98-79, SIDE B
Number 0001
MR. SCOTT replied he wasn't sure what expansion activities it would
entail. For example, would the recent meetings with a group of
people who had approached him trying to get power, be considered
expansion activities? He noted that MEA doesn't presently serve
this group of individuals, but is obligated to provide them a
service.
REPRESENTATIVE BERKOWITZ asked about MEA's political activity.
MR. SCOTT said that political activity is also hard to define. For
example, he assumed the annual meeting could in part be considered
political activity because some people wanted to vote, which is a
political activity. The MEA certainly encourages their members to
turn out and vote and spends up to $100,000 in a year on that kind
of activity trying to get people geared up to contribute, to get
involved in the cooperative and to vote.
Number 0048
REPRESENTATIVE BERKOWITZ asked if the Matanuska Electric
Association had a marketing budget?
MR. SCOTT replied not a marketing budget per se. They do some
marketing, but it's blended in with everything else like safety
advertising, et cetera.
REPRESENTATIVE BERKOWITZ inquired if they had an advertising
department.
MR. SCOTT replied there's a member-public relations department,
which is him, which includes everything from buying the ads to get
people (indisc.) to handling complaints.
REPRESENTATIVE BERKOWITZ inquired if including a checkoff with the
billing would pose any difficulty.
MR. SCOTT replied he thought it would. He believes the initial
reaction of a lot of people when asked if they'd like to spend
money is going to be no.
Number 0125
REPRESENTATIVE BUNDE asked if Mr. Scott had an idea of what
percentage of members, on an average, vote in one of MEA elections.
MR. SCOTT replied their turnout generally runs 28 percent to 30
percent.
CHAIRMAN GREEN asked if there were additional questions for Mr.
Scott. There being none, he requested Sam Cotton to present his
comments at this time.
Number 0162
SAM COTTON, Chairman, Alaska Public Utilities Commission, testified
via teleconference from Anchorage that APUC has not formally met on
HB 487. However, he had met with the staff as well as the
Assistant Attorney General assigned to the APUC and a couple
problem areas were identified. He referred to Section 1 and said
the procedure by which a customer gives consent is not clear and
he's not exactly sure what process is being proposed. He thinks he
understands the intent, but doesn't believe the language adequately
describes it. He added, "As far as the existing statutes - as you
well know, the existing statute says you can't include an allowance
for political contributions or for public relations and then
there's some exceptions and in our regulations, we also define
political advertising, et cetera, so we have some restrictions
right now. It gets a little confusing because it has to do with
where the money comes from and this bill has the same terminology
here and it uses the word 'rate' and by the way, I will offer up an
(indisc.) work with the commission here with your committee staff
if you want to do some further work on this - further define that."
He said with respect to the complaint process, people complain to
the commission - the commission then directs that complaint to the
utility and requires them to give an answer to the person making
the complaint. If the complainant is still not satisfied, it can
be elevated to a formal complaint that will come to the commission.
Number 0337
REPRESENTATIVE CROFT observed, "If one of these utilities did make
a political contribution, your remedy to that would be to exclude
it from the rate base. You don't have the power to say they can't
do it - you just have the power to say that you have to pay it out
of profits in effect."
MR. COTTON affirmed that.
REPRESENTATIVE CROFT continued that the sole remedy for an
individual ratepayer who indicates they don't want to be a part of
that political statement, activity or contribution, is to get it
changed in an accounting sense from a rate base contribution to a
profit, but they can't disassociate themselves any other way from
that.
MR. COTTON responded this may be an avenue for (indisc.) to do that
and it may be that the statute dealing with cooperative
corporations needs to be looked at regarding prohibiting the
activity; this just prohibits putting it in the rates.
REPRESENTATIVE CROFT asked Mr. Cotton if he had any suggestions to
improve the procedures set out in Section 1, which Mr. Cotton had
indicated were cumbersome.
MR. COTTON said he thought the way it was vague in the way it was
being described.
CHAIRMAN GREEN thanked Mr. Cotton for his testimony and asked Mr.
Yould to come before the committee to present his comments.
Number 0429
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative
Association (ARECA), prefaced his testimony on HB 487 with the
following statement: "Before I testify on this bill, I would like
to make one correction that is out on the table right now - it's a
misperception. Cooperatives do not make political contributions to
ARECA and then we in turn make them back to political candidates.
In fact, that's not to say that we don't have a political action
fund, but that fund is not directly infused by the cooperatives.
They do not give money to that fund; instead individual members of
the cooperatives, on a voluntary basis if they desire, can make
contributions to that fund and it's out of that fund that we can
engage in certain political activities. In addition, however, the
cooperatives do support me and my staff for the day-to-day
businesses on their behalf and frankly, I am down here at their
request representing their interests, but we are not, through that
particular activity, supporting any kind of direct contributions."
MR. YOULD testified that HB 487, in ARECA's opinion, has a lot to
do with the whole issue of deregulation which is an issue that's
come to the state of Alaska somewhat late and very possibly there
are reasons for that. One of the major reasons is that the state
of Alaska is very much different than the Lower 48 in terms of the
industry itself and the makeup of the industry. He noted there had
been a question about cooperatives and where they should be in the
electric utility industry, and as a matter of fact, 70 percent of
the electricity generated in the state of Alaska comes from
electric cooperatives. Another 20 percent comes from municipal
entities which means that 91 percent of the electricity that comes
to the citizens of Alaska comes from consumer-owned entities. Part
of the reason for that is because it was never economically
feasible for the investor-owned utilities to come to the state of
Alaska. He remarked there are some in the state that are very good
utilities. For example, Alaska Electric Light & Power in Juneau
and the Alaska Power and Telephone which serves some of the small
villages. But as a general rule, Alaska is a consumer-owned state
and he thinks ARECA has done an excellent job and when looking at
what might happen in a deregulated industry, power isn't going to
be shifted back and forth through microwave, but there are going to
be some positive changes to the industry. There's going to be
micro-generation, fuel cells, as well as a number of changes, but
there won't be the quantum leaps forward and the consequential
drops in the cost of electricity that have been seen in the
telecommunications industry. He added, "So I really want to
caution everybody not to expect - even if we got totally
deregulated tomorrow - to see a tremendous drop in rates."
Number 0590
MR. YOULD said with regard to HB 487, "Mr. Chairman, in many
respects, I think that we're trying to get into details here that
are a bit premature. There's some four other bills that are in the
legislature at the present time. In addition to HB 487, you have
SB 355, HB 235, HB 287 and HCR 34. House Concurrent Resolution 34
is one which my membership - and I represent virtually all of the
electric cooperatives or electric utilities in the state of Alaska
at least from the standpoint of how much power is produced and
that's all the way from Chugach down to the smaller utilities such
as AVAC (ph) in Levelock - my board of directors voted 18 to 1 to
request the legislature to set up a special committee to address
deregulation. We did that this last summer and we brought our
request to the leadership and the leadership responded by having
adopted, at least on the House side so far, HCR 34. Mr. Chairman,
we think this particular bill raises some very appropriate public
policy issues; I think they do need to be discussed; I think the
level of questions coming out of you all and amount of - I'll call
it ambiguity that there may be associated with what does this bill
mean and what doesn't it - are appropriate to be discussed, but I
would strongly encourage that they be discussed in more detail in
the legislative committee that we hope this legislature will adopt
under HCR 34."
REPRESENTATIVE CROFT asked if any of the other bills, including HCR
34, have to do with political activity by co-ops or utilities or
are they primarily competition, expansion and so forth.
MR. YOULD said the other bills primarily have to do with direct
competition; they don't specifically address some of the things in
this bill.
Number 0699
REPRESENTATIVE JAMES said, "Just a couple of things and on the
political activity - and I was happy to have the person from ARECA
come and tell us that is that according to the campaign finance law
that we have currently on the books, unless they were to get
permission from the individuals to put money into a PAC or
political activities, it would not be available - I don't think
it's currently available - this bill makes it available, so it
doesn't close it down, it opens it up is what I see here. The
other question that I have is that - I think it was about 1944, I
made a speech on the benefits and advantages of a cooperative so I
have a little background history on this issue, my question to you
on this issue is, do you believe that cooperatives -- the reason
that you have a cooperative -- if you think they can compete or
should they compete with businesses that are not cooperatives."
MR. YOULD said that was a valid question and many of the states are
actually trying to come up with deregulation bills at the present
time. He said ten states have passed deregulation bills; nine have
turned it over to their APUCs; 23 have established subcommittees to
study it and 10 are doing nothing. Many of the states that have
actually passed laws for deregulation give cooperatives
specifically the authority to opt out of deregulation; in other
words, not even participate. He remarked that it's really depends
on what this legislature would like in that regard and he admitted
he didn't fully understanding why when there are entities in the
railbelt, about the only place that deregulation would work in
Alaska, where all of the rates are already at somewhat parity - why
we want to have one utility trying to take customers from another
at the expense of some other consumers who may see their bills go
up as a result. He commented that he isn't the final say on that
and thinks it should be addressed by the subcommittee coming up.
In terms of cooperatives, he thinks they're an excellent mechanism
in which to keep the cost of power down. He said we all own them
and frankly, we're not paying dividends to someone in the Lower 48
or paying higher interest rates associated with debt service and in
some respects we're getting tax breaks from the federal government.
He stated there's not a general manager or staff in the
cooperatives throughout the state of Alaska whose cost of
management is near what the cost of management is in AMRON (ph) or
any of the big industrial utilities. He doesn't think the
technology is there to justify the savings that everyone seems to
think is going to come as a result possibly of either deregulation
or (indisc.) own utilities.
Number 0820
CHAIRMAN GREEN said this issue should be reviewed by the proposed
group. He thanked everyone for their testimony and noted that
HB 487 would be held in committee.
HB 196 - WILLS, TRUSTS, & OTHER TRANSFERS
Number 0876
CHAIRMAN GREEN said the committee would take up HB 196, "An Act
relating to wills, intestacy, nonprobate transfers, and trusts; and
amending Rule 24, Alaska Rules of Civil Procedure." He called on
Representative Ryan to come before the committee.
Number 0876
REPRESENTATIVE JOE RYAN, Alaska State Legislature, said since the
hearing on HB 196 last evening, he had contacted people much more
knowledgeable on this issue who would be presenting their comments
today.
Number 0914
RICHARD THWAITES, Chairman, Alaska Trust Company, came before the
committee and said he would attempt to respond to some of the
questions raised in the committee hearing the previous evening. He
noted that someone had handed him something referred to as cliff
notes to which he was supposed to respond. He said, "The first one
that was opened was on page 15, the top of the page, there was
apparently on line 1, intent to strike the words 'and not
individually liable' following the word 'trustee' or 'the words',
then leaving just the designation as trustee after the signature of
a trustee to a contract constitutes prima facie evidence of an
intent to exclude the trustee from personal liability and the
trustee is not personally liable under the contract." His first
comments, directed to the deletions, were, "When as an attorney or
whenever we're looking at a particular statute or something like
that, and we see the generally accepted terminology, such as if you
sign off on a document 'a trustee' or 'as personal representative'
that identifies the fiduciary capacity of the individual involved.
Very often however, when a judge or someone else looks at this
document, the judge will say 'gee, the legislature went one step
further to require something additional.' This other language
which Representative Porter and I have discussed is to me sort of
-- it's kind of like a little consumer red flag there of sorts -
that it suggests that maybe there is some real specific intent
here.
MR. THWAITES continued, "Let me digress a little from that and step
back to comment on the Alaska Trust Act and how all of that came to
pass last year. This bill is sort of a follow-up to that bill and
they've been trying to implement various portions of the probate
code in the trust statutes to make it more amenable to
implementation by people outside of the state of Alaska. Our
intent being to perhaps attract a great deal of revenue in the
form of some of the offshore trusts and the like. In doing so, we
have found some (indisc.) by the lawyers and trust companies
outside the state saying this is a good idea - just how firmly
behind this is the state - what traditions are there and so forth
that might do that and in particular, the one issue that is raised
most often is the full faith and credit clause of the Constitution.
This is a clause of the U.S. Constitution that says that a judge in
the Texas court down there has to apply Alaska law with regard to
an Alaska trust for a Texas resident that is using an Alaska trust.
And our thought here would be that gee, for that judge if the
legislature stated pretty clearly over and above just the normal
kind of language you would see, this is a pretty clear indication
of what was intended and that this liability did mean to exclude
that. Further, we used originally the word irrebuttable evidence
because that is just a flat brick wall - there is no discretion.
If we change it to prima facie - and I agree as an attorney
certainly prima facie is a more reasonable standard - but it
permits the judge to have discretion on what's happening and how
it's going to be. The judge has a great deal more leeway
interpreting Alaska law if there is some discretion on his part
down in Texas to look at this -- and I don't mean to pick on Texas,
it's just that was the state I lived in before I came here when I
was a little kid -- but that was one of the intents for using that
much, much stronger standard. And I agree it is a very, very
strong standard. We did the same essential thing last year with
HB 266."
MR. THWAITES said in HB 266 a standard was set for the court to
dissolve a limited liability company only if was impossible to
continue the business. The idea was to take the discretion away
from the court so the court can't use the other standard, which is
it's just impractical to do this and therefore the judge could step
in and do that. He said the reason for many of these things is the
Internal Revenue Service interprets all of its provisions for
whatever it does based on state law, so the IRS's own statutes -
the Internal Revenue Code says that anyone interpreting an Alaska
trust must apply Alaska state law. He explained that by having
that stronger standard in HB 266, that imposed on the IRS the duty
to use that standard for valuing those assets which in a family
limited partnership or family limited liability situation, it means
less tax to the IRS and more money to the taxpayer in the form of
the transition to the other person. He said, "Now, our bill did
not require that of anyone doing this. In fact we assume as
planners that - where it's my family and I doing the planning -
we're going to use that stricter standard. But if myself and
another partner from a different family - we're probably going to
use the impracticability standard because we're going to want one
where it's between two families and we have that freedom of
flexibility." He explained it was because of those rules that the
stronger standards were adopted and this is sort of a continuation
of that.
MR. THWAITES stated that it is possible to use prima facie and it
works. It does give the judge a little more discretion if the
judge in some other jurisdiction is going to interpret what the
Alaska law means.
Number 1257
REPRESENTATIVE PORTER commented that apparently there had been a
misunderstanding with the drafter because the language in the
proposed draft is not what was discussed. He said he would not
have had a problem with wording that said signing as trustee is
prima facie and signing as trustee not individually liable
(indisc.) under the standard of irrefutable, but for some reason
the drafter put them both as irrefutable which doesn't make any
sense.
REPRESENTATIVE CROFT said he understands the distinction that's
being made, but it was being compared to the limited liability
company statute where a high standard had been set where it can't
be dissolved unless it's impossible to continue its business, but
it's still a judge determining impossible based on all the evidence
presented. In this case, there's a determination of intent where
the judge is not allowed to weigh any evidence, not matter how
compelling. It appeared to him there's a great difference between
setting a high standard and allowing evidence whether it meets that
very high standard and simply allowing no evidence at all. It
seems common that standards are set at various levels and sometimes
set a very high standard, but it's extremely rare to say
irrefutable, irrebuttable evidence - in fact that may be an
oxymoron.
MR. THWAITES said he thought Representative Croft was right. He
added, "Even when you say irrebuttable evidence, there are still
determinations that can be made by the court vis a vis whether or
not they've met the standards once within that year. I believe
that at least in this initial thrust here that we're doing, we did
try to go to the strictest one we could find thinking it would help
us in encouraging other trustees to co-trustee and bring their
business to the state and so forth if they knew much of this
language was focused at fixing, very definitively, that liability."
REPRESENTATIVE CROFT remarked there's preponderance, clear and
convincing, and beyond a reasonable doubt, but this can be every
doubt in the world, but a judge will not hear it. He noted that
usually in the civil areas, clear and convincing is used when the
ante is upped another notch, which he wouldn't have a problem with.
He does, however, have a problem with no evidence at all.
MR. THWAITES said he thought there was somewhat the same concept
with self-proving wills.
CHAIRMAN GREEN asked, Dick, on that point if you were the client
and I were the attorney putting this together, would you sign
something they've made an irrebuttable (indisc.).
MR. THWAITES replied, "Yes, I might very well do that - I might do
that because I know that you have a fiduciary obligation to me and
that in your fiduciary obligation to me as the trustee, you're
going to have to do these certain things, but I wouldn't want
outside interests or other heirs that I wanted to write out of the
will or other parties to come back in and make a challenge. I'd
want to make it extremely difficult and I would want to lock it up
as well as I could. And in hiring you as the attorney to do so, I
really do want you to make it as ironclad as I can."
Number 1585
REPRESENTATIVE JAMES asked if she was correct that because the
trust is so tight in this case, any kind of conflict will be aimed
at the trustee? Is that one of the reasons such strong protection
is needed for the trustee?
MR. THWAITES said yes, it is that the trust is often where the
money is located. He added, "Common law you may recall or not
recall - equity versus the law - they wouldn't allow access and
we've basically adopted old English common law rules, so we have
the at law provision and the equity provision. The equity
provision is what prevailed and allowed us to go after the trustee
and then the trustee turns around and seeks reimbursement from the
trust later on." He thought it was that historical quirk that has
necessitated this all these years. As a follow-up to Chairman
Green's earlier question, he said there are some existing trusts
where he wouldn't give this kind of release.
Number 1713
REPRESENTATIVE BERKOWITZ referred to the irrebuttable standard and
asked if that would preclude a determination based on equity where
the contract could be voided or exclude liability?
MR. THWAITES' response is indiscernible.
REPRESENTATIVE BERKOWITZ said, "This is a form of contract action
and we're distinguishing this type of contract action from other
types of contract action for policy reasons, but if you're entering
the trust, the contract would normally be voidable for duress or
fraud and in a normal contract you could get back at that evidence.
But if you have that rebuttable standard, it seems insurmountable."
MR. THWAITES said he believed the irrebuttable standard only goes
to the personal liability of the trustee, not to the underlying
(indisc.) the trust.
REPRESENTATIVE BERKOWITZ said if there's no personal liability,
there's no disincentive.
MR. THWAITES replied, "I think that in this particular section,
this is on a contract - an action on a contract against the trustee
in their representative capacity and we're not doing anything with
regard to the trustee in the representative capacity. In other
words, they are still liable in that representative capacity;
they're just not personally liable so we wouldn't go back to the
trustee and say out of the trustee's personal assets, the trustee
must reimburse in this particular action." He said the most
notorious case on this is an environmental case in New Jersey where
the trustee was held liable for the environmental clean-up costs
personally and those costs exceeded the value of the estate by some
$2 million. Suddenly, all the trustees said "no more land" and in
fact we're still operating in a large part today with the demeanor
that they will not handle a trust where there is land or real
estate involved without all of these disclaimers and so forth
involved.
REPRESENTATIVE BERKOWITZ remarked it seemed to him that prima facie
affords the trustee (indisc.) protection and that would seem to
qualify as adequate for the policy consideration (indisc.).
MR. THWAITES said he believed it does and as he mentioned
previously, he thinks that standard of prima facie is okay.
Number 2031
REPRESENTATIVE PORTER said, The way it's configured right now, it's
just dealing with the signature as trustee. Considering that that
generally is meant to indicate the lack of personal liability,
would the standard of - instead of rebuttable - clear and
convincing would be helpful?"
MR. THWAITES said it's better than the prima facie evidence.
Number 2090
REPRESENTATIVE PORTER made a motion to delete "prima facie" and
insert "clear and convincing" on page 15, line 2.
CHAIRMAN GREEN asked if there was objection to the amendment.
Number 2140
REPRESENTATIVE CROFT offered a friendly amendment to read,
"constitutes evidence of the intent to exclude the trustee from
personal liability that may only be overcome by clear and
convincing evidence to the contrary."
MR. THWAITES said he would defer to the drafter of the legislation.
Number 2218
REPRESENTATIVE JAMES asked if that could be considered a conceptual
amendment?
REPRESENTATIVE CROFT said, "I would conceptually be deleting
irrebuttable and putting in the idea that it can only be overcome
by clear and convincing evidence. So, I guess technically, that's
a friendly amendment to Representative Porter's amendment."
CHAIRMAN GREEN asked if there was objection to the friendly
amendment to the amendment?
REPRESENTATIVE JAMES wondered if this would be drafted by the
drafter in Legislative Legal Services.
CHAIRMAN GREEN assured her it would be the intent for the drafter.
There being no objection, Amendment 1 was adopted.
Number 2280
REPRESENTATIVE RYAN remarked, "From reading this, this is purely
discretionary thing on the part of the person who set up the trust
(indisc. - coughing) and what they're basically saying by absolving
the trustee of the liability is that I'm willing to have my trust
be responsible for the action, not the trustee."
Number 2366
REPRESENTATIVE JAMES said she didn't think the maker or the owner
of the trust is necessarily involved in this contract.
MR. THWAITES explained this is an action against the trustee in its
representative capacity and this language can be used in the
document to make sure the trustee is not going to be held
personally liable. He added if that language is used, then it is
an rebuttable presumption that can't be switched around.
REPRESENTATIVE PORTER noted, "But in the beginning of this, it is
that when a trustee makes a contract that is within the trustee's
powers as trustee, so he is the trustee and now he's making a
contract with trust funds with a third party ...."
MR. THWAITES said the second comment ....
TAPE 98-80, SIDE A
Number 0001
MR. THWAITES ... which was a clarification of the diminution in
value or increase in value of a trust through a tort action by the
trustee on page 15, line 11. He noted that it had been suggested
adding in that if a trustee has incurred personal liability for a
tort committed in the administration of the trust and that tort
increases the value of the trust property. He said that is a
clarification that he certainly has no problem with. It's a
clarification and the intent is that if for some reason there is an
increase in the value, the trustee has the right to use that
increase to pay off that liability of that tort. If there is an
excess amount of liability, the trust still keeps the amount; it
doesn't go to the trustee. If there is an insufficient amount, the
trustee presumably still has an obligation to kick in for the
insufficiency. But it leaves the trust in the whole capacity -
potentially with a profit if the tort was not adequately
compensated by the (indisc.).
Number 0129
REPRESENTATIVE CROFT asked what kinds of tort increase the value of
the trust property?
MR. THWAITES said clearing off a piece of real estate without the
right or authority to do it, might be example, where then because
it was cleared the land became worth more, but there was a covenant
in the restrictions that the land couldn't be cleared to the
detriment of the other owners and for some reason the land now
became worth $10,000 or $15,000 more because it was ready to be
used.
Number 0274
REPRESENTATIVE ROKEBERG referred to Section 13.36.195 on page 16,
regarding whether a trust could be created by an oral statement and
asked Mr. Thwaites to comment.
MR. THWAITES said, "We do have and can have what's referred to as
an instructive trust which is very often either by action or oral
conduct of parties."
REPRESENTATIVE RYAN pointed out a number of rural communities
don't have the facilities for an attorney to establish a trust and
people make oral wills and oral trusts under the circumstances and
they're acted upon on the basis that they're oral.
Number 0441
REPRESENTATIVE ROKEBERG said he didn't think there were any
provisions for an oral will in Alaska.
MR. THWAITES responded yes, there is under a military circumstance.
For example, a wounded soldier can make an oral will in the
presence of two witnesses.
REPRESENTATIVE ROKEBERG clarified there are no oral wills provided
other than the exception given by Mr. Thwaites. There are,
however, oral trust covenants.
MR. THWAITES said yes, it is possible to create an oral trust - the
actual term is a constructive trust - and there's a real
evidentiary question because you've got to have clear and
convincing evidence that there was a trust established. It's not
an easy thing to do.
REPRESENTATIVE ROKEBERG asked if a dying declaration would be an
example of that and is there any case law?
MR. THWAITES didn't believe there was any case law. He said there
was an attempt in the 1994 uniform probate code revisions to adopt
a will and a trust format like this, but it was not adopted by this
legislature at the recommendation of the probate section of the
[Alaska] Bar Association and a few other people.
REPRESENTATIVE ROKEBERG asked, "Doesn't this provision allow that
(indisc.) Are we not expanding significantly here our trust law to
allow that?
MR. THWAITES said he didn't believe this is expanding what's
already there.
REPRESENTATIVE BUNDE asked if an oral trust could possibly be
considered one that was created and recorded electronically on a
video tape?
Number 0646
MR. THWAITES replied, "Actually the video is on the verge of being
an admissible document now days and the video will for example, we
normally to cover ourselves will go ahead and write a written
document and then on the video confirm that for purposes of
clarifying capacity and what the intent of the party was." He said
the courts have discussed the possibility of accepting faxes and
other electronically transmitted devices as a mechanism for filing
in order to speed things up.
REPRESENTATIVE ROKEBERG reiterated his concern because of the
reference on page 16, line 25, that says, "by oral statement to the
trustee at the time of creation of the trust if the trust is
created orally" which implies there's a legal oral trust. He asked
if there was any authorization for that in statute or case law.
MR. THWAITES said he didn't think there was any case law in this
state, but there is case law in other states. He added, "In fact,
we've used the constructive trust format in real estate contracts
and other situations where it was an oral agreement - we were able
to get by the statute of frauds somehow."
REPRESENTATIVE ROKEBERG inquired if there is any prohibition in
Alaska's statute of frauds about the creation of a trust other than
deeds of trust regarding real estate.
MR. THWAITES said the statute of frauds has a list of types of
documents that require that certain evidence is excluded if you
don't meet the requirements of the statute of frauds. He added it
can be met by something less than a formal trust document - it can
be met by something on a napkin, for example, or in the form of
perhaps a dying declaration there are exceptions to the rule. He
couldn't specifically recall any at the moment.
Number 0805
REPRESENTATIVE ROKEBERG asked if Alaska's statute of frauds specify
that a trust be established in writing?
MR. THWAITES didn't know specifically.
REPRESENTATIVE ROKEBERG was of the opinion that question needed to
be answered before any action was taken on this legislation. He
asked if there was any language in HB 196 that provides that Alaska
could accept the provisions of another state's law in order to
administer the trust according to the law of that jurisdiction
about effecting our law in the state of Alaska?
MR. THWAITES said there was nothing in HB 196; he believed it was
contained in Article XIV of the U.S. Constitution. He further
stated the holographic will is valid in Alaska so if an Alaskan
makes a holographic will here and dies a resident of the state of
Washington, the state of Washington which does not recognize
holographic wills, will recognize the Alaska will in that instance.
REPRESENTATIVE ROKEBERG said it appeared to him that probably the
rationale for doing this is to make sure (indisc. - mumbling).
MR. THWAITES replied, "Well, I guess the limitation in (a) relates
to only the provisions of (1), (2) and (3) of this section. It
says an (indisc.) settlor may not relieve a trustee from the
duties, restrictions and liabilities imposed in the other section,
so we're talking only about duties and restrictions and liabilities
imposed by the trustee under 36.105 - .295 -- or altering or
denying the trust any or all the privileges and powers conferred in
those same sections or adding duties, restrictions, liabilities,
privileges, or powers, to those same sections - and I believe those
are the sections in the provision that relate to those general
powers."
Number 1015
REPRESENTATIVE BUNDE said, "On this point, I'm not sure why you
would want the oral provision, but as has been frequently stated,
there's always a huge case of proof if you attempt to use this oral
provision. So I don't see that we're creating a problem - creating
victims. You can't take care of every extenuating circumstance in
statute and if this is some remote possibility that they need,
knowing well that's it's going to be almost impossible to prove -
or very difficult at least - I'm not having a problem, but
Representative Rokeberg is having one and I'd be willing to look to
an amendment on the floor if ...."
REPRESENTATIVE ROKEBERG commented he didn't want to hold the bill
up.
Number 1082
REPRESENTATIVE PORTER made a motion to move CSHB 196 as amended
with individual recommendations and attached fiscal notes.
CHAIRMAN GREEN asked if there was objection. Hearing none,
CSHB 196(JUD) passed from the House Judiciary Standing Committee.
SB 244 - POLYGRAPHS FOR CORRECTIONAL OFFICERS
CHAIRMAN GREEN announced the final item of business would be SB
244, "An Act relating to polygraph or other lie-detecting testing
for certain correctional officers."
Number 1122
CRAIG JOHNSON, Legislative Administrative Assistant to Senator
Jerry Ward, Alaska State Legislature, came forward on behalf of the
sponsor to present the bill.
REPRESENTATIVE JAMES announced, as chair of the House State Affairs
Standing Committee, that she had heard SB 244 and would be
perfectly happy to move it.
MR. JOHNSON explained that the bill adds correctional officers to
the group of people that can take a lie-detector test for pre-
employment screening; right now, only policemen and transportation
officers can do that. It has been endorsed by the Alaska Peace
Officers Association, and he knows of no opposition.
CHAIRMAN GREEN said it seems like a good idea.
Number 1169
REPRESENTATIVE ROKEBERG made a motion to move SB 244 with
individual recommendations and attached fiscal note(s), if any.
REPRESENTATIVE PORTER commented that as a police officer who was
required to take polygraph tests, he thinks it is only fair that
correctional officers, who are now in the Alaska Police Standards
Council, will do the same thing.
Number 1186
CHAIRMAN GREEN asked whether there was any objection. There being
none, SB 244 moved from the House Judiciary Standing Committee.
ADJOURNMENT
CHAIRMAN GREEN adjourned the House Judiciary Standing Committee
meeting at 3:01 p.m.
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