Legislature(1999 - 2000)
02/12/1999 03:18 PM House L&C
| 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 LABOR AND COMMERCE STANDING COMMITTEE
February 12, 1999
3:18 p.m.
MEMBERS PRESENT
Representative Norman Rokeberg, Chairman (via teleconference)
Representative Andrew Halcro, Vice Chairman
Representative Jerry Sanders (via teleconference)
Representative Lisa Murkowski (via teleconference)
Representative John Harris (via teleconference)
Representative Sharon Cissna
MEMBERS ABSENT
Representative Tom Brice
COMMITTEE CALENDAR
* HOUSE BILL NO. 82
"An Act relating to immunity for certain claims arising out of or
in connection with the year 2000 date change; and providing for an
effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 82
SHORT TITLE: IMMUNITY:CLAIMS ARISING FROM Y2K PROBLEMS
SPONSOR(S): REPRESENTATIVES(S) ROKEBERG, Dyson
Jrn-Date Jrn-Page Action
2/05/99 144 (H) READ THE FIRST TIME - REFERRAL(S)
2/05/99 144 (H) L&C, JUDICIARY
2/12/99 (H) L&C AT 3:15 PM CAPITOL 17
WITNESS REGISTER
BOB POE, Commissioner-designee
Department of Administration
P.O. Box 110200
Juneau, Alaska 99811-0200
Telephone: (907) 465-2200
POSITION STATEMENT: Testified on HB 82.
BRAD THOMPSON, Director
Division of Risk Management
Department of Administration
P.O. Box 110218
Juneau, Alaska 99811-0218
Telephone: (907) 465-5723
POSITION STATEMENT: Testified on HB 82.
GREG BERBERICH, Vice President of Corporate Services
Matanuska Telephone Association
1740 South Chugach Street
Palmer, Alaska 99645
Telephone: (907) 761-2466
POSITION STATEMENT: Provided information on MTA's year 2000
preparedness, testified in support of HB 82.
JAMES BORDEN, Y2K Real-Time Systems Committee Chairman
Chugach Electric Association, Incorporated
5601 Minnesota Drive
Anchorage, Alaska 99519
Telephone: (907) 762-4774
POSITION STATEMENT: Provided information on CEA's year 2000
preparedness.
ROBERT DAY, Results Engineer
Municipal Light and Power
Municipality of Anchorage
1200 East First Avenue
Anchorage, Alaska 99501
Telephone: (907) 263-5295
POSITION STATEMENT: Provided information on ML&P's year 2000
preparedness, testified in support of legislation like HB 82.
TOM WALDOCK, Vice President of Administration
ENSTAR Natural Gas Company
3000 Spenard Road
Anchorage, Alaska 99503
Telephone: (907) 264-3660
POSITION STATEMENT: Provided information on ENSTAR's year 2000
preparedness, testified in support of HB 82.
DAVID LAURENCE, Vice President
and Chief Information Officer
Alyeska Pipeline Service Company
1835 South Bragaw Street
Anchorage, Alaska 99502
Telephone: (907) 787-8898
POSITION STATEMENT: Provided information on Alyeska's year 2000
preparedness, testified in support of HB 82.
ALYA DONALSON, Y2K Project Coordinator
General Communication Incorporated
2550 Denali Street
Anchorage, Alaska 99503
Telephone: (907) 777-6836
POSITION STATEMENT: Provided information on GCI's year 2000
preparedness, testified in support of HB 82.
MARK VASCONI, Director of Regulatory Affairs
AT&T Alascom
210 East Bluff Drive
Anchorage, Alaska 99515
Telephone: (907) 264-7308
POSITION STATEMENT: Provided information on AT&T Alascom's year
2000 preparedness, testified in support of HB 82.
LIBBY RODERICK
P.O. Box 203294
Anchorage, Alaska 99520-3294
Telephone: (907) 278-6817
POSITION STATEMENT: Testified on HB 82.
ACTION NARRATIVE
TAPE 99-7, SIDE A
Number 0001
VICE-CHAIRMAN ANDREW HALCRO called the House Labor and Commerce
Standing Committee meeting to order at 3:18 p.m. At the call to
order, Representatives Halcro and Cissna were present in the
committee chambers in Juneau. Representatives Rokeberg, Sanders,
Murkowski and Harris were present at the call to order,
participating from Anchorage via teleconference. Vice-Chairman
Halcro introduced "Flat Stanley," a school project of Nicolas
Martell, a second grade student at Government Hill Elementary
School in Anchorage. The vice-chairman noted "Flat Stanley" was
attending his first legislative committee hearing ["Flat Stanley"
was a small, person-shaped paper cut-out spending the week at the
Capitol in Juneau].
HB 82 - IMMUNITY:CLAIMS ARISING FROM Y2K PROBLEMS
Number 0133
VICE-CHAIRMAN HALCRO indicated the committee's order of business
was HB 82, "An Act relating to immunity for certain claims arising
out of or in connection with the year 2000 date change; and
providing for an effective date." Vice-Chairman Halcro stated he
would turn the meeting over to Chairman Rokeberg in Anchorage as
the prime sponsor of HB 82.
Number 0144
CHAIRMAN ROKEBERG stated the purpose of today's meeting was to: 1)
allow a number of businesses in Alaska, in particular those
organizations that were vital to the community, an opportunity to
speak to the issue of the year 2000 (Y2K) problem, the "millennium
bug." He noted he was pleased that a number of utilities were
represented. The purpose was to allow those businesses to "get the
message out" to the communities on the status of their ability to
come into compliance with the problems related to Y2K, and,
additionally, hopefully this would allay some of the fears and
concerns of Alaskans that might build toward the end of the year.
2) The committee was having an initial hearing on HB 82, which the
chairman indicated was intended to provide blanket immunity, as the
bill was currently drafted, to small businesses and to provide a
level of immunity from unnecessary and vexatious lawsuits related
to the Y2K issue to businesses that performed due diligence and
made good faith efforts to come into compliance.
Number 0303
CHAIRMAN ROKEBERG noted he thought there were a significant number
of things that needed to be done to change the legislation,
particularly in the area of exceptions to the immunity grant,
commenting he would briefly review a list of items this committee
and further committees should examine to modify the legislation.
First was the issue of actual damages or "caps" on any damages that
would come forward from a cause of action, unless, for example,
fraud was involved which could possibly open up the area of
non-economic or punitive damages. He stated recommendations had
also been made at the state chamber of commerce level whether they
should restrict or bar class action suits, or if they were "allowed
(indisc.) have a cap on the amount of damages." He commented that
another issue was the limitation on damages and immunities. He
noted this was very important because it was the problem of a chain
of transactions; there could be a domino effect from the one vendor
to another. Additionally, there was the possibility that a fully
compliant business organization could be could be reinfected by an
outside vendor or third-party supplier. Chairman Rokeberg
indicated they also needed to face the potential "of contractual or
situations where the attempted enforcement of a force majeure
clause in a contractual relationship may come into play against a
downstream supplier ...." Further, in this entire chain of
transactions, there was the question of what they were to do about
unknown embedded chips or microprocessors, things that were very
difficult to deal with at this stage. The chairman said the third
element was, in terms of a mandate, perhaps looking at mediation
rather than litigation. He next indicated that although the
legislation's current drafting created a blanket immunity, he
thought it was clear they shouldn't grant a blanket immunity to
hardware and software companies, and possibly suppliers and
consultants involved contractually in Y2K remediation.
Number 0520
CHAIRMAN ROKEBERG stated the committee also had Alaska's insurance
laws under its purview, noting the possibility of an
insurance-related hearing on the legislation. Testimony might be
received from the Division of Insurance on Alaska law relating to
directors and officers of corporation insurance (D&O insurance) and
whether the Alaska laws needed modification, or whether this should
be taken up in HB 82. He indicated it was important to make sure
that those companies, and their directors and officers, could stand
the challenge suits from shareholder or other types of officers if
they've done their due diligence in good faith. The chairman said
he thought there was current significant debate in the insurance
industry about whether or not this particular issue would trigger
a "business interruption type policy or other types of issues, so
it's rather involved area with just insurance alone that we need to
take a look at." From examining and studying the information,
Chairman Rokeberg said he thought it was clear that any grant of
immunity should not undermine the privy of contract that had been
entered into between various businesses and the buyer, and in no
way should the legislature impede the general commerce by granting
immunities in cases where this would overcome a contractual
obligation to, for example, a vendor or "vendee." In addition, the
Alaska State Chamber of Commerce had suggested limiting the whole
area of immunity to contracting parties or limits there. He
indicated they would need to sort that out. Chairman Rokeberg
stated he would end his presentation on the bill itself with that,
indicating there were a number of people who wished to testify on
their business' or organization's actions and activities in the
area of Y2K preparedness. The chairman noted it was a very complex
issue, commenting the committee wanted ensure they crafted a good
piece of legislation before the bill was sent on to the House
Judiciary Standing Committee, which would give it a thorough
hearing. Chairman Rokeberg stated he would returned the gavel to
Vice-Chairman Halcro for the first witness in Juneau. [The sponsor
statement read:
House Bill 82 calls for immunity for Alaskan businesses
for certain claims arising out of or in connection with
the year 2000 date change.
The Year 2000 date change (commonly referred to as "Y2K"
or "Millennium Bug") could have a tremendous impact on
businesses in Alaska. Currently, some states have
adopted laws that provide immunity to governmental
entities for claims arising out of Y2K situations.
Governor Knowles has introduced legislation for
consideration by the Alaska Legislature to provide
immunity for state and local governments. Other states
are considering such measures, as well as measures
protecting businesses. House Bill 82 would provide
similar immunity for Alaskan businesses.
Across the United States and the world, businesses are
facing exposure to lawsuits resulting from possible Y2K
claims. Businesses in Alaska are no exception. There
have been estimates that it will cost small businesses as
much as $450-600 per affected computer program to address
the Y2K problem. Many businesses are making good faith
efforts to address the problem but may not be able to
fully solve the problem.
The immunity described in House Bill 82 does not apply to
businesses with 11 or more employees if a person bringing
the civil action shows by a preponderance of evidence
that the business failed to use due diligence or good
faith efforts to avoid the damages claimed in the civil
act.
By offering this immunity, HB 82 will assist in
encouraging small businesses to continue or begin to
address the Y2K situation faced by that particular
business.
Your support would be appreciated.]
Number 0727
VICE-CHAIRMAN HALCRO indicated both the Anchorage and
Matanuska-Susitna (Mat-Su) Legislative Information Offices (LIOs)
were on teleconference. He invited Commissioner-designee Poe to
the table.
Number 0760
BOB POE, Commissioner-designee, Department of Administration, came
forward to testify, introducing Brad Thompson, Director, Division
of Risk Management, who joined Commissioner-designee Poe at the
table.
Number 0777
COMMISSIONER-DESIGNEE POE stated they were there to suggest
improvements that might be made or other considerations that might
be included in the debate and discussion on the legislation. He
recognized many of the points Chairman Rokeberg had just raised.
Commissioner-designee Poe noted they would provide a handout that
was a survey of all the other states' efforts, as well as the two
federal statutory efforts, in this regard. He commented that the
current bill relied on business size in determining immunity,
noting there were a lot of other considerations which should be and
Chairman Rokeberg had listed several. Secondly,
Commissioner-designee Poe stated he would ask Brad Thompson to
speak about the distinction between immunity and limitation of
liability, indicating they think that the sponsor and affected
parties were looking more toward limitation of liability than
immunity. Commissioner-designee Poe said other states had tended
to address three basic areas in their legislation that this bill
did not. 1) Limitations on the plaintiff group: size of the class
action suits, kinds of folks involved, et cetera.
Commissioner-designee Poe noted Chairman Rokeberg had mentioned
some of the chains of events that could lead to a possible
litigation, stating those kinds of events brought or did not bring
a suit, like "vicarious liability," needed to be limited and
described more fully. 2) Standard of proof: what actually had to
happen in order to have a limitation of liability. 3) Limitation
of remedy. Commissioner-designee Poe said many of the states'
legislation and the federal legislation dealt with this area. He
described, "Alright, so there was some damage related to your
computer system that affected another business - should you be
allowing punitive damages or suits years and years after the fact,
or should they be more restricted to things that deal with the
actual damage that occurred?"
Number 0946
COMMISSIONER-DESIGNEE POE stated they knew of 32 state and local
public immunity bills. Of these, 27 of these were in process, and
5 had passed. There were 12 active state bills and 2 active
federal bills dealing with the private sector. None of the bills
dealing with the private sector had been passed yet. He indicated
one of the most difficult aspects of the private sector issue was
interstate commerce, noting, "If you have any kind of business that
does business in more than one state, you're gonna have a problem
dealing with that business with state legislation. It'll be
federal legislation that'll be much more effective in protecting
those businesses. That's why the federal bill that's outlined in
this summary may be something you want to look at closely and
consider whether this may also do the job." With that,
Commissioner-designee Poe asked Mr. Thompson to speak on immunity
and limitation of liability issues, suggesting that Mr. Thompson
might also want to talk about some of the general issues at the
federal bill level, and some of the more pertinent state bills.
Number 1061
BRAD THOMPSON, Director, Division of Risk Management, Department of
Administration, noted there were five states which had enacted
legislation to protect both the state and local municipal entity
from Y2K liability, and 27 states were actively considering bills.
Regarding actions filed against state and local governments, he
said they needed to remember it was a privity, or right, of each
state to set or waive its preexisting rights of sovereign immunity
to allow actions to be filed against it. A couple [of states]
still retained full immunity, most restricted the nature and type
of tort claims they allowed to be filed against them, and some set
specific statutory caps or limits on the type of remedy to each
claimant or per occurrence. He indicated Alaska did not have a
cap, but did have in AS 09.50.250, and also at the municipal level,
the allowing of claims to be filed against the state and local
governments. Mr. Thompson commented that was the distinguishment
between a public entity and the private enterprise. He noted, as
Commissioner-designee Poe had mentioned, that there were 12 states
currently considering restricting the type of claims in a Y2K
litigation that may be filed. Some were restricting it to
financial service providers, banking institutions; some were
referring and limiting to lawsuits involving class actions only to
those which each member had damages in excess of $50,000; there
were burdens of proof; there were affirmative defenses being
considered to be applied; however, none of these state bills had
been passed.
MR. THOMPSON said it was a very important matter to the general
commerce and industry amongst the states. He indicated at the
federal level it was S.96 [Senate Bill 96, short title: "Y2K Act"]
that provided the most comprehensive and involved protection to
general commerce and industry, referring to the materials they had
provided with a synopsis of S.96. Mr. Thompson noted that
legislation contained a specific provision for a limited state law
preemption. He said, "The federal Act will supersede the state law
regarding recovery of harm caused by a Y2K failure to the extent
that the federal law establishes a rule of law applicable to any
recovery which is inconsistent with state law." Commenting he was
not a lawyer, he stated, "But the ability and the authority to pass
a federal bill that preempts and the diversity of jurisdiction
arguments -- the legal arguments from a business that is domiciled
in Alaska may be affected by this bill but not affecting a
non-Alaskan business." He said the present definition of business
proposed in HB 82 did not address location. He commented it was a
complicated issue, and a far-reaching and difficult challenge. The
previous fall the federal government had enacted the Year 2000
Information and Readiness Disclosure Act [S.2392 RS]. Mr. Thompson
indicated that was to enable both public and private business to
exchange information as to their Y2K preparedness, which they had
been reluctant to do until that point in case others might later
rely on that information and use it in the form of an additional
claim or an argument of liability. Mr. Thompson noted the federal
law addressed that and currently there was a much more real and
complete exchange of information at the national level, not at the
state.
Number 1307
COMMISSIONER-DESIGNEE POE commented it was a very complicated,
difficult issue. It was complicated because, on one hand, it could
be seen that there were businesses that might be tied to some
lawsuit related to Y2K through no fault of their own and who would
certainly be better of if this could be somehow prevented. On the
other hand, defining who, under what circumstances, how, and across
state jurisdictions, became a very challenging issue because the
state of Alaska, as a sovereign entity, could define what it was
going to be immune from. However, because Alaska is also part of
the United States and the United States Constitution, rules
relating to interstate commerce exist that make this much more
difficult to do. Commissioner-designee Poe suggested that was why
a federal bill might be better, but noted that was for this
committee and future committees to consider.
VICE-CHAIRMAN HALCRO asked if there were any questions for either
Commissioner-designee Poe or Mr. Thompson.
Number 1381
CHAIRMAN ROKEBERG asked Mr. Thompson if the Year 2000 Information
Readiness and Disclosure Act of 1998 was commonly known as the
"Good Samaritan Law." The chairman also asked if S.96 which Mr.
Thompson had also referred to had been introduced by Senator
McCain, and Senator Gorton of Washington. He noted that bill must
have been very recently introduced.
COMMISSIONER-DESIGNEE POE answered in the affirmative to both
questions, noting S.96 had been introduced on January 19. [Note
S.96 was sponsored by Senator John McCain of Arizona and
co-sponsored by Senator Bill Frist of Tennessee.]
Number 1425
VICE-CHAIRMAN HALCRO asked Commissioner-designee Poe if S.96
limited the size of exempt companies, noting HB 82's Y2K immunity
only applied to companies with 11 or fewer employees.
MR. THOMPSON replied that he did not believe it was done by size,
and he did not think another state did it by the size of the
entity, stating, "It does it more by the act and creating
limitations on either the argument or the remedy available."
VICE-CHAIRMAN HALCRO indicated he felt it might be unfair to limit
it by company size, commenting that what was to say a company with
11 or fewer employees would have more of an incentive to address
Y2K compliance than a company with 111.
Number 1476
COMMISSIONER-DESIGNEE POE agreed and said, "If you think about its
impact on the economy -- when we look at why Alaska's economy is
diversified today, I think it's largely small and medium-sized
businesses." He questioned whether that was 10, 40 or 200
[employees], noting that became an issue. Additionally, he
commented that it would not take much of an amendment on the
"floor" to change the bill's character remarkably.
VICE-CHAIRMAN HALCRO asked Commissioner-designee Poe if he felt,
with all his work on Y2K, it would be more beneficial to remove the
11 or fewer provision from HB 82.
Number 1523
COMMISSIONER-DESIGNEE POE responded that it was probably not the
best criteria to use, indicating other items that had been
mentioned like limiting the size or type of group that was allowed
to sue over this, limiting the kinds of damages which could be
sought, having a very clear standard of proof, et cetera, might be
better. Commissioner-designee Poe offered to go through the six of
seven bulleted items related to S.96 so the committee could
understand that bill's intent.
CHAIRMAN ROKEBERG commented there were a number of witnesses
wishing to testify.
VICE-CHAIRMAN HALCRO stated the committee would save
Commissioner-designee Poe's input for the next public hearing.
Number 1567
REPRESENTATIVE CISSNA asked if the committee members could obtain
copies of S.96 for their information.
COMMISSIONER-DESIGNEE POE gave a copy of the federal legislation to
the committee aide, indicating the bulleted items were on the
second to the last page.
Number 1598
REPRESENTATIVE HARRIS confirmed it would be possible to get copies
of the other states' bills.
CHAIRMAN ROKEBERG noted the committee would obtain copies,
commenting they had a copy of the California legislation which they
were doing some research on. He indicated that legislation might
not be very applicable.
Number 1616
VICE-CHAIRMAN HALCRO announced the committee would hear testimony
from the Mat-Su LIO, noting there was one witness there.
Number 1627
GREG BERBERICH, Vice President of Corporate Services, Matanuska
Telephone Association (MTA), testified next via teleconference from
the Mat-Su LIO in support of HB 82. He thanked the chairman and
vice chairman for inviting him to speak to the committee. Reading
from a prepared statement, he said:
"MTA is a member-owned telephone cooperative that
provides local exchange service for over 32,000 member
owners from Eagle River to Clear/Anderson. MTA's service
area encompasses approximately 10,000 square miles.
"I'm speaking in favor of House Bill 82. I'd like to
start with a brief overview of what MTA has done in
preparation for the year 2000 bug, then briefly address
the wisdom of the proposed legislation.
"For legal considerations, I want to note that the
following is a Y2K readiness disclosure for MTA.
"MTA has been aware and has been preparing for the Y2K
issue for several years. We established a formal
committee to work on this issue over a year ago at MTA.
To augment our own efforts, we also engaged a Y2K
consultant to provide advice and direction on our
approach to the problem. We began the process by
preparing an overall plan for our Y2K efforts. Since
then, we have done an inventory of our systems,
established compliance requirements on new purchases, and
assessed where and to what extent we were at risk, and
gone ... on to implement upgrades and replacements as
required. This year we'll be focused on conducting
testing and establishing contingency plans for those
areas where it may be necessary. We've also worked with
our suppliers and business partners to insure that
there'll be no Y2K failures in our supply process.
"From the industry standpoint, MTA has participated in a
number of surveys and information requests from the FCC
[Federal Communication Commission], APUC [Alaska Public
Utilities Commission] and Rural Utility Service [RUS].
We're also involved with industry trade associations such
as USTA - United States Telephone Association, NTCA -
National Telephone Cooperative Association, and ATA - the
Alaska Telephone Association, in discussing the Y2K
problem and in sharing solutions and concerns.
"We feel we're as prepared as possible for the next
millennium and have exercised due diligence in addressing
the Y2K date problem. Nonetheless, we recognize that the
Y2K date changes are a multifaceted challenge, and even
with sincere efforts and considerable expense there may
still be problems. MTA appreciates Chairman Rokeberg's
submission of House Bill 82. We believe this will
provide the safety net for companies in the private
sector, like MTA, who are working diligently to avoid any
disruption due to the year 2000 date change. With the
passage of this bill, business will be allowed to focus
on eliminating the source of Y2K failures without fear of
frivolous litigation.
"This concludes my testimony to ... House Bill 82. I'd
like to thank the chairman and the committee members for
this opportunity to explain MTA's efforts in addressing
the Y2K problem and to comment on the positive effect we
anticipate House Bill 82 will have on the business
community."
Number 1780
REPRESENTATIVE MURKOWSKI commented it sounded like MTA had
certainly done the due diligence one would be looking for, noting
MTA had spent a couple of years on this. She said she was curious
to know what the contingency plan was if, in fact, "everything went
to hell in a hand basket."
Number 1801
MR. BERBERICH noted the contingency planning, as such was currently
going on this year. However, in MTA's case they had met with most
of their vendor-suppliers, had identified those issues and
software, and felt comfortable that they had addressed all MTA's
major items. He indicated they would be developing the contingency
plan during the year's third and fourth quarter, after testing and
identifying the location of problems, and whether or not there were
solutions. Mr. Berberich indicated it was somewhat difficult to
find out whether problems existed and what could be done about such
problems until much of the testing and such had been completed. He
said that MTA was fairly confident at this point that they were not
going to have any big problems, but he commented that, as the
committee well knew, no one was making any guarantees anywhere.
REPRESENTATIVE MURKOWSKI said she was curious about the "what
happens if" scenarios, asking if MTA was prepared to have all of
its employees there on January 2 [2000] with its field people ready
to go.
Number 1898
MR. BERBERICH answered in the affirmative, indicating that they
were all going to be on the job in case something went wrong, but
it was their expectation there would be no problems.
CHAIRMAN ROKEBERG commented Mr. Berberich had mentioned MTA was
hoping to test its third-party links. He asked if MTA didn't have
contractual obligations or understandings with the people tied into
MTA's system that MTA would be testing.
Number 1936
MR. BERBERICH indicated the answer was yes, noting they were
finding it was more of a legal issue in terms of whether he had
guarantees from everyone. He said what they were finding and what
they were sending out is that everyone was doing due diligence but
no one was going to give a guarantee. Mr. Berberich stated they
were giving what they believed were maybe highly confident letters.
CHAIRMAN ROKEBERG confirmed that Mr. Berberich was 99 percent sure
MTA would be able to deliver service to its customer base on
January 1, 2000, but couldn't give a complete assurance.
Number 1991
VICE-CHAIRMAN HALCRO confirmed there were no further questions for
Mr. Berberich. He stated he would turn the gavel back to Chairman
Rokeberg because there were approximately six witnesses waiting in
Anchorage.
CHAIRMAN ROKEBERG called James Borden forward, indicating a ten
minute limit had been given for each witnesses' testimony but
brevity would be appreciated.
Number 2021
JAMES BORDEN, Y2K Real-Time Systems Committee Chairman, Chugach
Electric Association, Incorporated (CEA or Chugach), testified next
via teleconference from Anchorage. He stated it was Chugach's
intent that the December 31 [1999] date change be business as
usual. Mr. Borden said it was particularly their intent that all
of their three Y2K projects were done by the summer, that no
Chugach customers lost power for any time due to Y2K problems. He
noted they had three major projects underway and had been involved
with these projects since 1992. He stated the projects were in the
area of generation and generation control, substations and
transmission and distribution lines, and in business systems. Mr.
Borden stated their business systems were substantially complete.
The automated controls in the transmission and substation areas
would be complete by midsummer; he noted that was the project begun
in 1992. The testing and remediation program in the generation
area was underway. Testing had been completed on their major
generating units and they were moving on to what they considered
their smaller peaking units. Mr. Borden stated they would be
moving on to contingency planning at the completion of their
testing and remediation program, "and then particularly plan as it
relates to how they were going to operate on December 31." He
stated this was dealing with such issues as what personnel they
would have on duty, what materials and resources would be available
to them if there was a problem. Mr. Borden noted that concluded
his overview of Chugach's Y2K activities.
Number 2108
CHAIRMAN ROKEBERG thanked Mr. Borden for his brevity. The chairman
commented that the survival and conduct of daily life for Alaskans
and the state's commerce was founded on the delivery of reliable
electrical energy. He said that clearly the electrical utilities
were being looked at for their ability to conform under this
situation. Noting he knew a 100 percent guarantee was an
impossibility, he asked Mr. Borden what his comfort was, and how
Chugach's board and management felt about the utility's ability to
be done [with the company's Y2K preparedness]. He asked if there
was a very high level of confidence or what Mr. Borden could say
that would reassure the public.
Number 2151
MR. BORDEN said, putting it into personal terms, that he didn't
plan on buying a generator or stockpiling food. In terms of
Chugach's management and board of directors, he said their mission
was to do whatever it took to make the system Y2K-ready, with
providing service to their customers being the primary concern, not
manpower and budgets.
CHAIRMAN ROKEBERG commented that Chugach was the "almost
monopolized" generator of power on a wholesale basis on the
Railbelt.
MR. BORDEN said they were the largest supplier of wholesale and
retail power in the state.
CHAIRMAN ROKEBERG asked, given that and Chugach's major place in
terms of utilization and generation into the transmission system,
"Do you have plans or is there a feasible way you can test their
compliance in the entire Railbelt transmission and intertie
system?"
Number 2200
MR. BORDEN replied that Chugach was not in place to do that
independently of the other utilities. He said the Railbelt had a
number of forums, organizations, through which interconnected
utility projects went forward. Mr. Borden noted he had not been
involved in those forums and could not speak to them directly. He
said their work had been internal to Chugach's system.
CHAIRMAN ROKEBERG confirmed Mr. Borden could not answer about the
interface with the others.
Number 2226
REPRESENTATIVE HARRIS commented that the bill appeared to almost
not apply to Chugach's business at all.
MR. BORDEN commented he would agree also.
REPRESENTATIVE HARRIS asked if Chugach, and larger businesses like
Chugach, with more than just a few employees, wished for some sort
of immunity or worried about lawsuits involving the Y2K problem.
Number 2245
MR. BORDEN said they were concerned about two nontechnical areas:
1) the legal issues, particularly issues relating to the potential
for lawsuits or claims relating to Y2K problems with the system; 2)
public reaction to the Y2K in total. He said they believed they
might be faced with litigation because of the scope of their system
if there were problems. Therefore they were taking a due diligence
perspective: preparing documentation that would allow them to show
what activities they had done, how they'd met their time lines and
budget commitments, and ultimately been able to proactively deal
with Y2K. He stated he was not prepared to speak directly to
whether or not Chugach was looking for immunity, but he indicated
they recognized those legal problems that could arise and were
taking action to mitigate them.
Number 2289
CHAIRMAN ROKEBERG indicated he thought some misunderstanding
existed about HB 82's meaning. He stated the bill provided a
blanket immunity for small businesses with 11 or fewer employers,
and also provided immunity for those other companies that had
performed due diligence and had acted in good faith. The chairman
indicated the legislation did, in fact, provide immunity and was
intended to impact larger businesses. He further indicated the
current bill was really too broad, noting they needed to put
"substantial (indisc.) on it ...."
Number 2329
REPRESENTATIVE MURKOWSKI asked about Chugach's contingency plans if
the testing showed no problems but there were actually problems
when the date changed, noting Chairman Rokeberg's comments and
Chugach's large market share. She stated it would be January and
cold.
Number 2349
MR. BORDEN said they shared her concern and had a contingency plan
that was philosophically based on thinking the unthinkable. He
stated that regardless of the outcomes of their testing program,
they intended in their contingency planning to identify what could
cause them not to operate and sort those things by their
probability [and] impact. Regarding their testing program, they
expected as systems were tested and found not to be compliant, to
be able to deal with those issues. He noted they had identified
some of the key contingencies. Mr. Borden stated, "For those that
have particularly high impact, in fact areas of our concern would
be (indisc.) particularly the area of telecommunications (indisc.)
it's one area of infrastructure that can have a very serious
impact, to have plans in place, back-ups in place to be able to
deal and operate the system on (indisc.), or in fact for that - for
the next quarter." Regarding their testing program, he said they
expected, as systems were tested and found not to be compliant, to
be able to deal with those issues. He also noted they had
identified some of the key contingencies.
CHAIRMAN ROKEBERG stated, "I think you're trying answer my question
in terms of the generation transmission, but you have relationships
with a number of other utilities in the state because you're also
in contracts and those types of things, and you also even sell
power to ML&P [Municipal Light and Power] sometimes." He asked if
Chugach had looked at the interface - the compatibility - between
itself and Municipal Light and Power, Matanuska Electric
Association (MEA), et cetera, or if that was again out of Chugach's
purview.
Number 2413
MR. BORDEN said the purview of Chugach's committee was its internal
systems. He stated he was not aware of direct communications but
he said they worked collaboratively to "test (indisc.) crossed
(indisc.) systems." As the Chugach's committee chairman, he said
it would be their anticipation that they would operate the system
such that there be a loop put on the system so there would not be
interchanges with that period. He said they'd leave the
transmission lines in place but they wouldn't transfer energy.
CHAIRMAN ROKEBERG interjected that it was very cold in Fairbanks
and Golden Valley Electric Association (GVEA or Golden Valley)
might really need Chugach's power next January. He indicated this
subject concerned him.
Number 2445
REPRESENTATIVE SANDERS asked if Mr. Borden could give him as a
consumer any real assurance that Chugach's generation and
distribution systems were going to be in as good shape as its
billing system.
Number 2458
MR. BORDEN replied it was Chugach's intent that they would be
ready, that the date would roll over and it would be business as
usual. He said the problem was so complex from the technical
viewpoint that it was almost impossible to give a blanket
guarantee. Mr. Borden indicated that the systems could be tested
and they could be satisfied that they were ready, but there were so
many opportunities for both internal and external problems that no
guarantees could be given.
CHAIRMAN ROKEBERG asked, "As chairman of your committee, have you
looked at ... all your equipment and everything else..." [TESTIMONY
INTERRUPTED BY TAPE CHANGE.]
[Note: during the tape change the chairman mentioned "embedded chip
with unknown microprocessor," taken from tape log notes]
TAPE 99-7, SIDE B
Number 0001
MR. BORDEN replied, "... readiness plan which is unfolding right
(indisc.). The first step of that'd be the inventory, where you
actually go to each facility, open up the device, inventory the
equipments that you find there. As part of that inventory, you
will have by manufacturer serial number a listing of all those
components that have the potential to be a problem in the system.
Using the number sources, and one of them is a database of
compliance that's kept by ... a research institute, we do a
preliminary check for problems with those particular devices. We
then go through a process of testing those devices. If there is a
problem with the testing ... we then determine what the remediation
as it needs to do -- be, and then repair those." Mr. Borden said
that so far their testing had not found anything they would call
mission critical. He noted they had found some problems in terms
of man/machine interfaces, for example, between a turbine control
and the remote control room. However, he said there were no
outages so far related to any of their testing efforts.
CHAIRMAN ROKEBERG indicated Mr. Borden had said there were other
groups and committees working on the transmission problem, noting
he would appreciate it if Mr. Borden would look into that issue
and provide the committee with his findings.
MR. BORDEN provided some written testimony to the committee for the
record.
CHAIRMAN ROKEBERG indicated Mr. Burke of Representative Sanders'
office was present and could take that information for the
committee.
Number 0099
ROBERT DAY, Results Engineer, Municipal Light and Power,
Municipality of Anchorage, testified next via teleconference from
Anchorage. He said he was acting in capacity similar to Mr.
Borden's, as the Y2K leader at ML&P and he was present to report on
their findings at ML&P and what they had been doing to remedy the
situation. He noted his background in engineering, commenting how
he always wanted to address how they made electricity by
generators, and where they are, and how they interconnect them, and
all of these questions that predicate the answers that come about:
"Well, gee what parts of this will fail?" He mentioned a recent
call from someone who believed all the transformers would fail.
Mr. Day noted that was utterly false, there was nothing inside of
the transformers that had any knowledge of date or time. He
stated, "It's a tin can full of oil and a coil of wire, so there's
nothing in that transformer to fail. So, basically we can look at
that from an engineering standpoint and say that's not a problem
and move on to other things." He noted ML&P had looked into all of
the things they thought could possibly affect their ability to
deliver power to the people of Anchorage. It had been mentioned
that CEA [Chugach] sometimes sold power to ML&P; sometimes ML&P
sold power to Chugach and to the other utilities connected to the
Railbelt, that was the whole reason they had the intertie. He
stated, "Because many hands in this pool help to make the work
continue when one falters, and that's really the whole point of
this Y2K contingency planning, Y2K mitigation." Mr. Day said they
wanted to ensure that all of these things didn't fail at once
because that would overwhelm their ability to solve these problems
and "keep the lights on." That was what they did on a daily basis:
solved problems, generated power with machinery, and delivered it
with wires and cables. Mr. Day indicated things happened all the
time, and one of the aspects of the electric company's job was to
go out and solve these problems on a day-to-day basis. If Y2K did
not bring a lot of new problems, then it would be business as
usual.
MR. DAY stated that, in terms of ML&P, approximately ten generation
units were used to create the electricity and two of these were
currently being replaced. There were a few more generation units
out at the Eklutna power plant owned jointly with Chugach which
were being replaced, and there were two others at ML&P's original
"Plant One" that were also being replaced. He commented that the
remaining two generators were already in compliance, noting they
had some very, very firm letters of compliancy and, therefore, had
no reason to believe those generators were not going to operate.
Mr. Day stated their boiler controls had been recently replaced and
that project was just finishing. Their SCADA [Supervisory Control
and Data Acquisition] control was being replaced and was expected
online by midsummer. He noted this was the main computer they used
to control the electrical system and it was a joint project with
Chugach, their sister utility. The meter-reading equipment had all
been replaced and they had solved the Y2K problem with their
billing system. Mr. Day indicated ML&P's financial system was
currently being upgraded through a municipality-wide initiative.
He noted the Y2K issue was not necessarily the sole reason for
these changes, commenting that the financial and billing systems
were 20 years old. He said they did expect to have a power outage
somewhere in the Anchorage Bowl on December 31, 1999 or January 1,
2000, because it would be a Friday night, New Year's Eve, with
intoxicated people and vehicles, but the lights should be back on.
He indicated ML&P supported legislation of this nature that tried
to mitigate the legal ramifications of a problem they were all
working very hard to resolve. He stated ML&P would continue to
investigate and try to mitigate this problem as much as possible,
regardless of the outcome of the legislation.
Number 0337
CHAIRMAN ROKEBERG asked if Mr. Day could shed any light on the
question the chairman had directed toward Mr. Borden, noting he had
spoken about the SCADA system.
Number 0350
MR. DAY noted it was an engineering acronym, supervisory control
and data acquisition. He noted, "It's a computer system that
monitors the (indisc.) from large capacity delivery points
throughout the system. It measures the interchange between
ourselves and our sister utilities and helps the generators to
raise or lower production based on what we're supposed to be
generating." He added that part of this system was to recognize
when there was a deficiency on one or the other side, and react
accordingly. He described a problem had occurred that day with
their plant in Muldoon, noting no one's lights on the entire
Railbelt had gone out because, as a participant in the Railbelt,
Chugach provided them with emergency power and ML&P stepped up the
production on their remaining generators. He noted they hadn't
operated in the most economical mode during that time, but the
power had stayed on. He indicated the SCADA system's function was
to monitor and control that on a real-time basis, noting moment by
moment the computer watched what was going on and sent out
adjusting signals to the various components in the electrical
system.
CHAIRMAN ROKEBERG indicated he was interested in knowing if there
was any kind of group working on this problem as it related to the
entire intertie in the state and the Railbelt.
Number 0414
MR. DAY commented he was a bit confused by the chairman's terming
of it a problem. He indicated that the interconnections, wires and
devices that enabled them to interconnect were in most cases not
date and year sensitive, thus not at risk for Y2K problems. Mr.
Day said it was the control apparatus behind it was the Achilles
heel they wanted to examine. He commented that since both they and
Chugach had replaced their existing SCADA control equipment with
similar systems that were purchased with the year 2000 in mind, and
the vendor had assured them there was compliance, they didn't
really see that there was a problem with the intertie.
CHAIRMAN ROKEBERG asked if the SCADA gear for interfacing needed to
be in place for all the electric utilities like Golden Valley and
MEA [Matanuska Electric Association], questioning how that worked.
MR. DAY indicated it didn't really matter if the utility was not a
generating utility, it then being more of a billing and
after-the-fact function.
CHAIRMAN ROKEBERG commented that Golden Valley was a both a
generator and buyer.
Number 0472
MR. DAY explained that Golden Valley had recently gone through a
large-scale program to bring its existing SCADA system into Y2K
compliance. As far as he was aware, Chugach, Golden Valley and
ML&P would all be Y2K ready as far as SCADA systems.
CHAIRMAN ROKEBERG noted the committee would appreciate any more
information Mr. Day could give the committee on that issue,
indicating this area was of importance.
MR. DAY gave his personal assurance that those things were being
looked at and, for the most part, the lights would stay on. He
noted they might have some small distribution outages here and
there, commenting he was sure this was going to be the case with
Chugach as well. Mr. Day indicated ML&P's research had not yielded
any "showstopper."
Number 0521
REPRESENTATIVE MURKOWSKI indicated the materials contained a
comment regarding that possibly in the anticipation and paranoia
attached with Y2K that so many people would turn their lights out
at 11:55 on New Year's Eve and turn them back on ten minutes
afterwards that a surge of power would be created that blew
everything. She asked if there were going to be any public
relations (PR) efforts from the utilities to assure people their
lights would work and this kind of action was not necessary.
Number 0553
MR. DAY indicated he was part of that PR relationship,
participating in public forums and including informational mailers
with their bills to try to bring the level of hysteria down a bit.
He commented, "There is some old '60s (indisc.) terrorism that used
to suggest this was a way of getting even with the big corporate
giants -- let's go out there and flush all the toilets all at once
- switch all the power off all at once -- it never really worked
then, I don't know that it would work now." He indicated if people
were to do that in a concerted manner, they could probably make the
utility "sweat a little bit" but he didn't think it was within
their power to burn things down or cause the system to fail. He
indicated the utility's computer systems and fail-safe devices
would prevent any permanent damage.
CHAIRMAN ROKEBERG asked Mr. Day if he was aware that there was
another bill introduced this session that would immunize the state
and local governments.
MR. DAY answered in the negative.
CHAIRMAN ROKEBERG commented, "Then presumably because ML&P is owned
by the Municipality of Anchorage that the immunity would flow from
that legislation to you vis-a-vis Chugach and the other utilities."
Number 0619
MR. DAY responded that regardless of that, his purpose had been
reassure the committee and put the message out into the public
forum that the electric utilities were going to be ready.
CHAIRMAN ROKEBERG noted that was the primary purpose of the
meeting. He recognized from Vice-Chairman Halcro that the other
piece of legislation was HB 57.
Number 0665
TOM WALDOCK, Vice President of Administration, ENSTAR Natural Gas
Company (ENSTAR), testified next via teleconference from Anchorage.
He indicated he was there at the committee's invitation to discuss
ENSTAR's efforts to contain the Y2K bug and his comments were meant
to be a disclosure under the federal Year 2000 Information and
Readiness Disclosure Act. He stated ENSTAR didn't explore for or
produce natural gas, stating, "That's the job of the ARCOs [ARCO
Alaska, Incorporated] and the Marathons [Marathon Oil Company] and
the others in the Inlet." He indicated ENSTAR brought the gas to
the communities. They brought high pressure gas from at or near
the gas fields through several hundred miles of transmission
pipeline to the various communities they serve. At the city gate
of each of the communities they had a distribution grid where they
reduced the pressure and then took it to their individual customers
throughout their service area. On January 25, 1999, ENSTAR reached
and exceeded its 100,000 customer. On the business side, they kept
track of each customer, billing them monthly. ENSTAR paid its own
expenses, kept track of its assets, generated accounting records,
and made reports to the Alaska Public Utilities Commission (APUC),
the governmental entity that regulated their business. He stated
their Y2K program, like their business, also had an operation side
and a business side. On the business side, their goal was to not
have any significant business system fail due to the Y2K bug. He
stated generally what they had done was taken an inventory of all
the hardware and software that could possibly be affected by the
Y2K virus, developed a plan of action, had a testing schedule, and,
more appropriately, they had a contingency plan. He indicated he
had elaborate examples he could give the committee if desired. Mr.
Waldock stated ENSTAR thought they were about 95 percent compliant
in their business system. He noted the committee that the Y2K bug
was not new news, they had been concerned and working to solve this
problem throughout the 1990s.
MR. WALDOCK noted he had some words of comfort on the operation
side. He stated that the natural gas business was not especially
"high tech" compared to the telecommunications industry and even
the electric industry. Yes, they did have hundreds of miles of
pipe in the ground and remote devices at various locations that
could control the flow [of gas] from a central location. However,
at least with respect to their primary gas sources - the gas they
received from Marathon and the Beluga fields ARCO operated -
wherever there was an on or off valve, that valve was set to fail
in the open position. He noted they also had modulating valves at
different points which could be set at varying degrees of flow. If
those valves failed for any reason, including the Y2K virus, they
were set to fail in place. Mr. Waldock stated ENSTAR did not
believe there would be an interruption in its gas supply on January
1, 2000. He commented they had not only relied on the nature of
the valves as they had examined and tried to solve this problem,
but they had also inventoried what could be affected by the Y2K
problem in their operations side, prepared an action plan at each
instance, testing, and had a contingency plan. ENSTAR had
determined its SCADA system was year 2000 compliant. The
communications systems were compliant, both internal telephone and
microwave communication systems. Mr. Waldock indicated they
thought they were currently at 95 percent of full compliance in
their operation system. He noted ENSTAR was presently receiving
all of its gas from Marathon and ARCO's Beluga field. Mr. Waldock
commented that they had had extended communications with their gas
suppliers and had been assured that their suppliers' systems were,
like ENSTAR's, in a "fail open" or "fail in place" valve, and there
would be no interruption in service on January 1. He mentioned
Representative Murkowski's concerns about contingency plans, noting
theirs was about four years old. He commented that through most of
ENSTAR's existence the company did not have remote, computer-driven
control devices and valves; everything was done and controlled
manually. He commented they still knew how to do this and would
have crews ready to take over the system manually. Mr. Waldock
stated ENSTAR welcomed HB 82; the company thought it would "throw
a bucket of cold water" on the current frenzy among attorneys,
consultants and others. It would retard finger-pointing and
provoke cooperation, and businesses like theirs would be able to
spend less money on attorneys and consultants, and more of their
resources on solving the problem.
Number 0998
REPRESENTATIVE MURKOWSKI indicated the reasons for her questions
about contingency plans were make sure that if the legislature did
pass legislation that provided immunity to the private sector, the
private sector would not use the immunity as its contingency plan.
MR. WALDOCK said it seemed to him that due diligence would have to
mean a real contingency plan as the bill was currently written.
CHAIRMAN ROKEBERG commented that should probably be stipulated in
the draft.
CHAIRMAN ROKEBERG noted to Mr. Waldock, "Your gas supplies the
electrical utilities in very large part, so you're the cornerstone
of the whole pyramid of utility service ...."
Number 1068
MR. WALDOCK stated they transported ML&P's gas for them. Chugach
had separate pipelines to its Beluga facility, so ENSTAR didn't
transport much gas for Chugach. ENSTAR did have Bernice Lake, the
facility at "International," and "Soldotna One."
CHAIRMAN ROKEBERG asked if ENSTAR, as its Alaskan operation,
engaged in interstate commerce.
Number 1098
MR. WALDOCK replied a lawyer would answer yes to that question
because they used the telephone and the mail, but the practical
reality was no. Their business was totally within the state.
CHAIRMAN ROKEBERG asked if they were a common carrier pipeline that
was regulated by federal agencies.
MR. WALDOCK stated they were not regulated by FERC [Federal Energy
Regulatory Commission], the federal agencies, and not classified as
a common carrier. They were regulated by APUC as a utility.
Number 1119
DAVID LAURENCE, Vice President and Chief Information Officer,
Alyeska Pipeline Service Company (Alyeska), testified next via
teleconference from Anchorage. He indicated Alyeska had been
working on the project for a couple of years, particularly
intensively the past year. Mr. Laurence stated this was the number
one project at Alyeska, noting he was accountable to Bob Malone
(ph), the president and CEO [chief executive officer], for the
project's outcome. He indicated seven teams working on the project
reported to him. Mr. Laurence said, "(Indisc.) the test phase in
most cases. Some of our testing's completed. All our projects are
on or ahead of schedule, so we feel pretty confident about the
outcome." He said one comment he would make about testing and
contingencies was that they had found in their testing that systems
represented in many cases by vendors to be compliant, had turned
out not to be, whether it was the individual systems or the way the
systems worked through the logic of other particular aspects of
controlling their operations. Mr. Laurence stated they thought
testing was vital, indicating they were going from component
testing to system-level component testing, [to] a much broader
systems level testing. He indicated Alyeska's SCADA systems
controlling the pipeline had been completely certified and
functioned appropriately, although he noted they had some broader
level testing to do throughout the pipeline.
Number 1219
MR. LAURENCE indicated they felt their contingency plan was the
most significant thing they would be doing from mid-June on. He
stated, "We've already designated all critical employees,
management, informed them all there won't be any vacation around
two dates this year, 9/1/99 and 12/31/99 obviously. Our
contingency plans will be (indisc.) command system which is our
mechanism that we use to respond to any sort of instability of the
environment ... -- and it's a well-understood process within the
company, tested on a regular basis. So these particular cases we
find this summer will be tested using our (indisc.) command system.
So, for us safety in terms of our Y2K ... successes, first of all
is safety, no one gets hurt, no issues (indisc.); the second of
all, no environmental impacts occur to our operation." He noted
their contingency plans did not necessarily rely on their systems
actually being operational, "but whether on man and control of the
systems, and anticipating the testing potential mechanisms to react
to outcomes that we deem to be serious. We also say that we're
working on our vendors pretty heavily, because we can't run the
pipeline without some of the people who are actually in the room
here. From two aspects, one is that our employees obviously are
concerned about ... how potential utility (indisc.) and other
things could affect their own personal lives, so if you're worried
about whether you have heat or not, you're not so inclined to worry
about whether the pipeline's operational or not. So we're
addressing those issues as well. We draw some critical components
that we bring in from outside the state in order to help us run the
pipeline for us, which contingencies are found around those as
well. So, as far as this particular bill goes, I think we welcome
the legislation. I think based on the fact that we are regulated
by the DOT [Department of Transportation] and we're (indisc.)
corporation and we have a rather interesting ownership structure,
I'm not sure it affects us except for the due diligence piece of it
of which we're certainly compliant."
Number 1366
CHAIRMAN ROKEBERG commented it might potentially affect one of
their suppliers or local vendors. Commenting on chains of
activity, he asked if Alyeska's vendors "on all your software and
hardware in terms of (indisc.) and even any out-sourcing vendors
you may have used -- ... how have your agreements, both your
operational and maintenance agreements -- have you reviewed all of
those particular agreements and contracts to make sure that the
responsibilities for compliance and/or cures to these problems are
covered by your contracts and your agreements?"
Number 1416
MR. LAURENCE said to answer he thought they needed to look a little
more broadly at the way they dealt with this entire problem. He
indicated most people probably first "triaged" to discover which
systems were mission critical to the enterprise's operation and
then group by mission critical, business critical, and then less
important. He stated the same held true for their vendors, noting
there were two approaches. If there were systems like the chairman
spoke of and they were operating internally, Alyeska actually
tested them themselves. He indicated many times someone else's
system was being put into a logic circuit that the systems
manufacturer had no knowledge of, and Alyeska had to test.
Secondly, he referred to experiences with relatively new
technologies, less than two years old, that the vendors said were
Y2K compliant, but Alyeska found out this was not true during
testing. He indicated that unless the vendors could prove the
systems were compliant, Alyeska tested. He noted the risk was just
too great. Mr. Laurence commented the other type of vendor was
someone who, for example, would be providing some "dry (ph)
reducing (ph) agent" which was important to operate the pipeline.
He commented they could run the pipeline without this agent, but at
a lower capacity which had mostly financial impacts to the state
and owner companies. He stated the contingency there was how they
wanted to deal with a potential interruption to the shipment of
"dry (ph) reducing (ph)" agent. Mr. Laurence noted they couldn't
really trace the logistics back as far as they would go to assure
them that this agent would be arriving because there were "too many
links in the chain." He noted, therefore, they felt they needed to
have their own contingency to deal with that and achieve their goal
of safety, no environmental impact, and operation of the pipeline.
CHAIRMAN ROKEBERG questioned whether Alyeska's contractual
obligation with that particular supplier spoke to this delivery.
Number 1565
MR. LAURENCE replied the contractual obligation could and did,
noting on one hand there were the remedies if the supplier didn't
deliver and on the other hand there was the reality that they still
had to operate their enterprise. He stated they were preparing for
the contingencies that would impact them significantly and cause
them to have problems in one of the three areas he had mentioned:
safety, environment or operation. He indicated there was the issue
of dealing with the problem and then dealing with the suppliers.
CHAIRMAN ROKEBERG indicated he took it Alyeska would like to
maintain the ability to have a cause of action against that vendor
or supplier who promised Alyeska they were supplying the product
but failed to do so because a system the supplier had warrantied to
be compliant wasn't.
MR. LAURENCE stated he would not say that was Alyeska's official
policy, but he said that they would obviously like to have
remedies, noting anyone would like to have remedies if someone was
negligent.
CHAIRMAN ROKEBERG noted he just wanted to bring that out to make a
point, indicating he wasn't targeting Alyeska specifically.
Number 1659
ALYA DONALSON, Y2K Project Coordinator, General Communication
Incorporated (GCI), testified next via teleconference from
Anchorage in support of HB 82. Ms. Donalson noted she had been
involved in Y2K issues for about 25 years, the first few years as
a [computer] programmer and a source of the problem. She stated
she would like to discuss GCI's actions and current status in
addressing the year 2000 problem. "In 1997 GCI established a
company-wide task force to assess and address the Y2K issue. We
set as our number one goal the delivery of service. We realize
that the organizations are dependent upon our facilities to
accomplish their critical activities, and our goal is ... business
as usual. One of the things that we focus on is that the ensuring
that we can deliver phone service, complete transmission of
critical data, provide Internet -- that's our top priority .... At
this time GCI has completed its inventory and assessment. We've
identified some upgrades that are necessary and are replacing or
upgrading any item that might affect service delivery. The
majority of our ... elements are currently Y2K-ready." Ms.
Donalson noted she would speak a bit on the testing process they
had undergone. "Most of our large items are tested by the vendors
that provide them - most of the large switches - and what we have
done is not only taken their letter, we have taken their test
plans, their test results, and sent our engineers to review those
tests and come back and make assessments. So far in all cases the
test results have shown us that there is no service delivery
failure ... that means phone calls will go through the switch and
connect with the next switch down the line. Occasionally there are
some problems with people monitoring the switch or looking at the
switch might see something out of sequence ...."
Number 1786
MS. DONALSON continued, "One of our greatest challenges has been
communication, not with the hardware/software, but with other
organizations. Our policy has been to be very open with our
customers and business partners related to our Y2K status." She
indicated the more that was known about any organization's Y2K
status the better, commenting, "with Y2K it's what you don't know
that can hurt you." Since January of 1998, GCI had been contacting
their business partners and suppliers to determine how their Y2K
efforts might affect GCI's ability to deliver service. She
indicated the most disturbing response they had received to their
inquiries from some was that all Y2K inquiries must be referred to
the organization's legal department. She noted this might mean the
organization viewed Y2K as a legal problem rather than a business
problem. Ms. Donalson indicated the 1998 Year 2000 Information and
Readiness Disclosure Act was a step in the direction of telling
companies to proceed with the business of resolving the problem,
not getting ready for lawsuits. She commented, "Some people
believe that you have to force us to do this. Actually, what will
happen is if your customers are not confident in your ability to
deliver service, they aren't your customers anymore. This is one
reason that GCI fully supports open communication on year 2000."
She stated HB 82 would help all organizations focus their energy
and resources on the solutions, not possible lawsuits, and
indicated the legislation was in the best interest of the public.
Number 1882
CHAIRMAN ROKEBERG asked if GCI was going to be Y2K-ready next
January 1.
MS. DONALSON replied their current plan was to be Y2K-ready in
early summer, noting they would be continuing their testing and
contingency planning efforts.
CHAIRMAN ROKEBERG noted GCI's business was overseen by both APUC
and the FCC, and that GCI was involved in interstate commerce. He
confirmed from Ms. Donalson that his older model Motorola,
Incorporated, cellular phone probably did not contain an embedded
chip and should function just fine.
Number 1968
MS. DONALSON stated, "One of the difficulties with the embedded
chip, though, is forcing them to think it's year 2000 or to have
warp (ph) test them and push them forward it's fine, which is one
of the reasons it's such a pervasive problem."
CHAIRMAN ROKEBERG asked if GCI was finding any embedded chips in
their equipment.
MS. DONALSON replied, "Well, we have a great deal of embedded chips
-- we have not found any of them that are in the models of
equipment that we have that are causing substantial failures, or
service delivery failures."
Number 2033
MARK VASCONI, Director of Regulatory Affairs, AT&T Alascom,
testified next via teleconference from Anchorage in support of HB
82. Mr. Vasconi spoke from a prepared statement:
"Thank you Chairman Rokeberg and the House Labor and
Commerce [Standing] Committee for inviting AT&T Alascom
to provide this testimony on HB 82.
"We at AT&T Alascom want to commend the committee for
stepping up to some of the issues posed by the Year 2000
problem. HB 82 is intended to provide protection for
persons and companies like AT&T Alascom who exercise good
faith and due diligence to identify and find solutions
for computer-based systems that may be affected by year
2000 errors. AT&T Alascom supports this bill.
"I would like to take this opportunity to provide the
committee with a brief summary of the efforts that AT&T
has undertaken to insure that the year 2000 date change
does not affect AT&T's systems or its customers.
"In 1996, AT&T recognized the challenges that the year
2000 date conversion represented to its systems and its
customers. AT&T's commitment to a year 2000 solution is
to take all reasonable steps to ensure that all our
systems are year 2000 compliant. In addition to our
in-house efforts, in new contracts with our equipment
suppliers we are also insisting on Y2K compliance.
"In response to these challenges AT&T established a
corporate Y2K program office that is responsible for
program management of all of AT&T's Y2K activities. The
focus of AT&T's Y2K effort is enterprise-wide, addressing
domestic and international Y2K activities across the full
extent of AT&T services including wireline-, wireless-,
and Internet-based voice and data.
"Year 2000 problems have been found at all levels of
computing from mainframes to desktops, software to
hardware, customer service systems to billing, and
switching to transmission. AT&T has inventoried and
modified million of lines of computer code and installed
millions of dollars in new equipment. In fact, in Alaska
AT&T Alascom has spent approximately $2 million on
replacing and upgrading our switches and pieces of our
network to insure that Y2K problems are discovered and
remedied.
"As of January 1, 1999, AT&T has fixed and tested 95
percent of its network elements. AT&T expects its
networks to be fully year 2000 compliant by mid-year
1999, allowing the company time to do extensive testing
before the end of the century. Because of the work
already underway and planned over the coming months, AT&T
and AT&T Alascom are confident that the entire network
will continue to operate on January 1, 2000.
"More information on AT&T's year 2000 compliance is
available at a special Y2K website: www.att.com/year2000.
"Given AT&T's considerable expenditure of personnel and
financial resources to become Y2K compliant, AT&T and
AT&T Alascom believe that firms that have been as
conscientious as AT&T Alascom should at least be granted
some form of assurance that their efforts to solve Y2K
problems will provide them with a reasonable defense
against civil claims. We also feel that this legislation
puts in place incentives for firms to invest in finding
and implementing solutions to Y2K's customer-affecting
problems, rather than spending resources in defending
themselves against civil actions.
"With that I conclude this testimony and again want to
thank the committee for giving AT&T Alascom this
opportunity to voice its opinion on this legislation."
Number 2345
CHAIRMAN ROKEBERG requested Mr. Vasconi provide the committee with
his written comments, asking the same of the other witnesses.
VICE CHAIRMAN HALCRO noted he was reminded of the "China plan,"
where the Chinese government was mandating that all airline CEOs be
on one of their planes at midnight [on December 31, 1999] as a
motivation for Y2K compliance. Vice Chairman Halcro asked Mr.
Vasconi if it would be feasible to have all telecommunications
senior executives stuck in a snow bank with their cell phones at
midnight.
Number 2406
MR. VASCONI indicated all critical personnel would be available.
He said network operations center personnel across the country,
including the one in Anchorage, and all field people, would be
placed on call. He said he did tend to believe, from his own
curiosity, that he would be making telephone calls at the turn of
the year to make certain things worked. He noted for the chairman
that AT&T was not allowing normal vacation or leave time for
personnel in network operation centers or field installation.
CHAIRMAN ROKEBERG commented, "There were earlier statements made
today that no matter what you do, there is no was possible to
assure the public..." [TESTIMONY INTERRUPTED BY TAPE CHANGE]
TAPE 99-8, SIDE A
Number 0001
MR. VASCONI indicated that until the moment came it would not be
completely apparent what would happen; systems were complex and
there was the chance that something could happen somewhere.
CHAIRMAN ROKEBERG noted time was running short and questioned
whether anyone present in Anchorage wanted to testify before the
committee.
Number 0075
REPRESENTATIVE MURKOWSKI noted Mr. Vasconi had given the opinion
that HB 82 would act as an incentive for due diligence.
Recognizing that "due diligence" had not been defined, she asked if
the legislation could also be viewed as a disincentive to doing due
diligence, in other words, doing what should be done.
Number 0125
MR. VASCONI stated he thought in certain instances it might be
interpreted as covered. Since the customer was ultimately affected
and the telecommunications market was competitive, there was an
incentive to ensure that their systems operated well, or customers
and revenue could be lost due to network outages or failures. In
the late 1980s, AT&T experienced difficulties with new software
placed in the network which caused catastrophic failures for "800"
service. Mr. Vasconi said AT&T learned some lessons from that
outage and had redoubled its efforts over the years to ensure that
the network worked properly. From a legal standpoint, he indicated
the protection offered an incentive to do the right thing, but he
also thought there was a business incentive to do the right thing.
CHAIRMAN ROKEBERG indicated one of AT&T's competitors wanted to use
its own Y2K compliance as a marketing tool. He noted it was an
interesting point: the immunity could result in not working on Y2K
compliance or the compliance could be used as a marketing tool.
Number 0340
LIBBY RODERICK testified next via teleconference from Anchorage,
indicating she was not affiliated with any of the companies present
and was speaking as a member of the general public. She expressed
the need to encourage the companies, utility companies in
particular, to come forward as possibly a group in the media, and
inform the public regarding their level of Y2K compliance,
especially since much of the information was reassuring. Ms.
Roderick commented she knew many people who did not have this
information. Speaking about the possible passage of HB 82, she
indicated granting some form of immunity to companies would not be
reassuring to the general public unless the public was aware of the
companies' level of preparedness and contingency planning. She
also indicated it would be helpful for the public to know that no
100 percent reassurances could be given. Ms. Roderick asked if
some information could be given regarding what would happen in the
horrible event something did fail. She questioned if the
municipality would receive the backing necessary to have something
like earthquake prevention basics - a contingency plan on that
level.
Number 0500
CHAIRMAN ROKEBERG commented that the testimony from the electric
utility companies was relatively reassuring. The primary purpose
of the meeting was to provide a platform and opportunity for the
utility companies to speak on the Y2K issue. Chairman Rokeberg
said one of his major concerns was the hysteria created from
newspaper articles; he noted the public utility base, in
particular, was a very important matter of public safety and
reliability. He clarified that good faith efforts and due
diligence, including contingency plans, had to be undertaken in
order to receive any immunity.
Number 0648
MS. RODERICK indicated the public would benefit from having that
information, if the information was correct, and also knowing that
there was a municipal or state preparedness plan in the unlikely
event there was failure of the basic survival systems. Eliminating
hysteria by having these two things could allow other areas, such
as food distribution, medical, 911 response, fire, et cetera, to be
addressed.
Number 0703
CHAIRMAN ROKEBERG confirmed no one else wished to testify in
Anchorage and passed the gavel back to Vice-Chairman Halcro in
Juneau for adjournment. [HB 82 WAS HELD OVER]
ADJOURNMENT
Number 0750
VICE-CHAIRMAN HALCRO adjourned the House Labor and Commerce
Standing Committee meeting at 5:04 p.m.
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