Legislature(1997 - 1998)
04/06/1998 03:18 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE LABOR AND COMMERCE STANDING COMMITTEE April 6, 1998 3:18 p.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative John Cowdery, Vice Chairman Representative Jerry Sanders Representative Joe Ryan Representative Tom Brice MEMBERS ABSENT Representative Bill Hudson Representative Gene Kubina OTHER HOUSE MEMBERS PRESENT Representative Eric Croft COMMITTEE CALENDAR * HOUSE BILL NO. 475 "An Act establishing a standard for determining when an injured worker is eligible for reemployment benefits and establishing a procedure for adopting a new, revised, or replacement standard for determining when an injured worker is eligible for reemployment benefits." - MOVED HB 475 OUT OF COMMITTEE * HOUSE CONCURRENT RESOLUTION NO. 34 Establishing a Joint Committee on Electric Utility Restructuring. - FAILED TO MOVE CSHCR 34(L&C) OUT OF COMMITTEE * HOUSE BILL NO. 479 "An Act relating to recognition of employers who hire Alaskans." - HEARD AND HELD (* First public hearing) PREVIOUS ACTION BILL: HB 475 SHORT TITLE: REHABILITATION OF INJURED WORKERS SPONSOR(S): LABOR & COMMERCE BY REQUEST Jrn-Date Jrn-Page Action 03/30/98 2789 (H) READ THE FIRST TIME - REFERRAL(S) 03/30/98 2789 (H) LABOR & COMMERCE 04/06/98 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HCR 34 SHORT TITLE: JT COM ON ELEC UTILITY RESTRUCTURING SPONSOR(S): LABOR & COMMERCE Jrn-Date Jrn-Page Action 03/30/98 2788 (H) READ THE FIRST TIME - REFERRAL(S) 03/30/98 2788 (H) LABOR & COMMERCE 04/06/98 (H) L&C AT 3:15 PM CAPITOL 17 BILL: HB 479 SHORT TITLE: RECOGNITION FOR EMPLOYERS OF ALASKANS SPONSOR(S): LABOR & COMMERCE Jrn-Date Jrn-Page Action 04/01/98 2832 (H) READ THE FIRST TIME - REFERRAL(S) 04/01/98 2832 (H) LABOR & COMMERCE 04/06/98 (H) L&C AT 3:15 PM CAPITOL 17 WITNESS REGISTER DWIGHT PERKINS, Special Assistant Office of the Commissioner Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Telephone: (907) 465-2700 POSITION STATEMENT: Testified in support of HB 475. PAUL GROSSI, Director Division of Workers' Compensation Department of Labor P.O. Box 25512 Juneau, Alaska 99802-5512 Telephone: (907) 465-2790 POSITION STATEMENT: Testified in support of HB 475. CHARLIE MILLER, Lobbyist for Alaska National Insurance Company P.O. Box 102286 Anchorage, Alaska 99510 Telephone: (907) 563-2686 POSITION STATEMENT: Testified in support of HB 475. ERIC YOULD, Executive Director Alaska Rural Electric Cooperative Association Inc. 703 West Tudor Road Anchorage, Alaska 99503 Telephone: (907) 463-3636 POSITION STATEMENT: Testified on HCR 34. DON EDWARDS, General Counsel Chugach Electric Association 5601 Minnesota Drive Anchorage, Alaska 99518 Telephone: (907) 762-4637 POSITION STATEMENT: Testified on HCR 34. ROBERT GRIMM, President Alaska Power and Telephone Company Address Not Provided Telephone: 1-800-982-0136 POSITION STATEMENT: Testified in support of HCR 34. JIM ROBERTS, General Manager Cordova Electric Cooperative P.O. Box 20 Cordova, Alaska 99574 Telephone: (907) 424-5555 POSITION STATEMENT: Testified in support of HCR 34. COLLEEN GRANGER, Manager of Member Services Copper Valley Electric Association P.O. Box 45 Glennallen, Alaska 99588 Telephone: (907) 822-3211 POSITION STATEMENT: Testified in support of HCR 34. NORM STORY, Manager Homer Electric Association 3977 Lake Street Homer, Alaska 99603 Telephone: (907) 235-3301 POSITION STATEMENT: Testified in support of HCR 34. CHARLES WALLS, President Alaska Village Electric Cooperative 4831 Eagle Street Anchorage, Alaska 99503 Telephone: (907) 561-1818 POSITION STATEMENT: Testified in support of HCR 34. ROBERT HANSEN, Chief Financial Officer Golden Valley Electric Association 1800 Loose Moose Loop North Pole, Alaska 99705 Telephone: (907) 488-2988 POSITION STATEMENT: Testified in support of HCR 34. MEERA KOHLER, Representative Anchorage Municipal Light & Power 1200 East First Street Anchorage, Alaska 99501 Telephone: (907) 263-5202 POSITION STATEMENT: Testified on HCR 34. RYAN KEGLEY, Legislative Secretary to Representative Norm Rokeberg Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801-1182 Telephone: (907) 465-4968 POSITION STATEMENT: Read sponsor statement for HB 479. ED FLANAGAN, Deputy Commissioner Department of Labor P.O. Box 21149 Juneau, Alaska 99802-1149 Telephone: (907) 465-2700 POSITION STATEMENT: Testified in support of the concept of HB 479. STEVEN ROUSE, Executive Director Trade Association, Make it Alaskan, Inc.; and Permit Agent and Program Manager for the Made in Alaska Program 200 West 34th Avenue, Number 600 Anchorage, Alaska 99503 Telephone: (907) 258-2878 POSITION STATEMENT: Testified on HB 479. ACTION NARRATIVE TAPE 98-44, SIDE A Number 0001 CHAIRMAN NORMAN ROKEBERG called the House Labor and Commerce Standing Committee meeting to order at 3:18 p.m. Members present at the call to order were Representatives Rokeberg, Cowdery, Ryan and Brice. Representative Sanders arrived at 3:19 p.m. HB 475 - REHABILITATION OF INJURED WORKERS Number 0074 CHAIRMAN ROKEBERG announced the committee's first order of business was HB 475, "An Act establishing a standard for determining when an injured worker is eligible for reemployment benefits and establishing a procedure for adopting a new, revised, or replacement standard for determining when an injured worker is eligible for reemployment benefits." He noted the bill had been introduced at the request of his daughter who works for Alaska National Insurance Company; he hopes he does not have a conflict of interest there. Chairman Rokeberg stated, "There is a Senate bill, and this is one of the amendments we were talking about on the floor this morning. However, given that this is very similar to the bill that I sponsored in this past last session regarding the worker's compensation guide to - to adopt it by statute - it's in statute now, we need to update the revised version and provide for a mechanism of which to go forward." He confirmed there was not a proposed committee substitute and asked if there were any witnesses for HB 475. The sponsor statement reads: This bill encourages government efficiency and allows the department to stay current when a new or revised edition of the United States Department of Labor, "Selected Characteristics of Occupations Defined in the Revised Dictionary of Occupations Titles" is issued. The bill gives the board 90 days after the new edition is published to hold and hearing and adopt the new standard. Number 0220 DWIGHT PERKINS, Special Assistant, Office of the Commissioner, Department of Labor (DOL), came forward to testify in support of HB 475. He said Mr. Grossi, the director of the DOL's Division of Workers' Compensation, was on teleconference to speak to the bill. Mr. Perkins said the department does support the legislation and stated, "Thank you for clearing up the request of the introduction of the bill. We saw it on the Senate side, but we were unclear on the House side ... we do support it, and you're absolutely right, Mr. Chairman, it has to do, similar to the last year legislation that you introduced with the workers' comp." Number 0280 PAUL GROSSI, Director, Division of Workers' Compensation, Department of Labor, testified next via teleconference from Anchorage in support of HB 475. He commented he doesn't know there is much more for him to say. As the chairman mentioned, HB 475 is very similar to the bill on the AMA Impairment Rating guides allowing for the automatic adoption by reference of the publication. He said this deals with rehabilitation issues, to physical and mental job requirements. The bill allows for the automatic adoption without the need for additional legislation or regulation, and the department looks at it as a streamlining process. He stated, "There's not a whole lot more to say about that, other than this one took a little bit more thinking about because the Department of Labor sometimes doesn't just change the edition, they change the title and so on and so forth, but we do believe that the way the - this legislation is drafted that it'll work just fine." Number 0370 CHAIRMAN ROKEBERG confirmed with Mr. Grossi that the 1993 edition which is the latest edition, would be put in the statute, but the provision is provided in Section 2, subsection (q), of the bill for the adoption as it is reissued in its subsequent editions ["* Sec. 2. AS 23.30.041 is amended by adding a new subsection to read: (q) ..."]. MR. GROSSI answered in the affirmative. CHAIRMAN ROKEBERG said the language in subsection (q) was like the language in the guide last year for the public notice and hearings to establish the date, so that everyone had ample notice it was going to be adopted. MR. GROSSI confirmed that was correct. Number 0414 CHAIRMAN ROKEBERG asked if this particular dictionary of occupational titles was in any way controversial within the area of workers' compensation. MR. GROSSI replied not that he knows of, commenting he has never heard that. CHAIRMAN ROKEBERG asked if there were two competing publishers with similar publications. MR. GROSSI said this is published by the United States Department of Labor, and he does not believe there is any competitor for this particular publication. CHAIRMAN ROKEBERG said, "Not as we find with the plumbing code, for example." MR. GROSSI answered in the negative. CHAIRMAN ROKEBERG noted Mr. Perkins said the administration department supports this, asking if that was correct. MR. GROSSI answered in the affirmative. CHAIRMAN ROKEBERG asked if he recalled the age of the existing edition. Number 0486 MR. GROSSI said the department is currently using a 1981 edition; HB 475 would automatically adopt the most current edition, the 1993 edition, and allow for adoption of future publications. CHAIRMAN ROKEBERG said he suspected there have been a lot of different job categories created in those almost 17 years. MR. GROSSI said that was correct, commenting there have been changes in the existing jobs. Number 0525 REPRESENTATIVE TOM BRICE asked Mr. Grossi what this dictionary is specifically, requesting he expand a bit. MR. GROSSI replied it basically describes the physical and mental requirements of a job, and allows an administrator or adjudicator to determine what would be the appropriate retraining plan. REPRESENTATIVE BRICE said, then, it basically sets out the requirements of somebody's job prior to an injury and whether or not that person is capable of fulfilling those duties again after an injury. MR. GROSSI answered that was correct. Number 0595 REPRESENTATIVE JOHN COWDERY said he wasn't sure if this was a related question but would like to receive an answer at some point. He asked "Say, in a scenario where you have -- the main wage earner of a family gets injured substantially, and say is recouping for a year or two after the injury, and say one member of his family say falls out of a tree or something and breaks an arm ... 18 months after his injury, is that child, since he's been on workman's comp or injured, is he - that child covered (indisc.) injury?" Number 0647 MR. GROSSI indicated the question was not really relevant to HB 475, but added the child would not be covered through the workers' compensation insurance policy. He stated, "It would depend on whether the person had a ... health insurance policy that covered the child." REPRESENTATIVE COWDERY indicated he would pursue an answer further. Number 0694 CHARLIE MILLER, Lobbyist for Alaska National Insurance Company, came forward to testify in support of HB 475. He said the bill was similar to the one the previous year that satisfies the public notice requirement for the new editions, and puts in the 1993 edition by statute so it does not have to go through that process for this transfer. Mr. Miller stated Alaska National Insurance Company supports HB 475, indicating he cannot see any reason why the most up-to-date edition should not be used. He said the company does not have any problems with the bill. The only concern last year was that the company have sufficient time to make the transfer; he said the 90 days seems adequate to the people in the company he has talked to. Mr. Miller confirmed that, because there is no effective date, it would take place in 90 days, giving the company the same 90-day period to make sure it had the editions in house. CHAIRMAN ROKEBERG asked Mr. Miller if he wanted a more immediate effective date. MR. MILLER said they think the 90 days is adequate to get editions and get their people "on board" with the new edition. Number 0790 REPRESENTATIVE JOE RYAN made a motion to move HB 475 out of committee with the attached committee zero fiscal note and individual recommendations. There being no objections, it was so ordered. HCR 34 - JT COM ON ELEC UTILITY RESTRUCTURING Number 0829 CHAIRMAN ROKEBERG said the next order of business before the committee was HCR 34, Establishing a Joint Committee on Electric Utility Restructuring. He noted this legislation was being introduced as a House Labor and Commerce Resolution to establish a joint committee of this body [the House] with the Senate to take up and review the needs for statutory changes within the Alaska regulatory scheme on the whole issue of electric utility restructuring, which in some parlance is called deregulation, but it really isn't because it's not perceived to necessitate a complete repeal of all regulation and oversight of the electric utilities. He explained that HCR 34 would allow a joint committee to review any proposals for those statutory changes to allow either all or a part of what's called retail wheeling or retail competition for electrical power in the state. He further stated, "We currently now have, as is nationally, what's called wholesale wheeling or the ability to take power and sell it on a wholesale basis across the state, which is done in the railbelt area, to various power sources, primarily Chugach Electric Association who wholesales power to virtually everybody along the railbelt power grid and so forth." The issue currently is whether or not Alaska should adopt any changes to allow this for retail competition. CHAIRMAN ROKEBERG further stated the legislature debated and held hearings on HB 235 last year, which would have basically stopped any potential retail wheeling because of a very high standard contained in the legislation, which in his opinion, essentially would have fundamentally been impossible to reach. He said the key area around the state is the apparent desire on the part of Chugach Electric Association to be able to provide retail competition for the Municipal Light and Power in the Anchorage area. He noted there's been some proposed legislation to undertake some types of statutory changes in the Senate and it's his opinion this area needs to be researched further. Based on his studies of the issue, he has determined that in the opinion of legal counsel, the Alaska Public Utilities Commission (APUC) and the attorney general of the state of Alaska, the APUC does have the power to grant competition and certificates of convenience for competition in Alaska. He remarked the committee may hear testimony to the contrary about the ability of the APUC to do that. Nevertheless, currently Chugach Electric Association has endeavored to supply power in the area of ML&P and there's a current docket before the APUC on the issue. He said, "The important thing to think about and remember about retail restructuring and what this means to retail competition is, as inviting as this is for a very free market-type of individual philosophically, such as I am, is that we will ... I believe that we need to take down some barriers to provide a (indisc.) of a free market place to potentially lower some of the costs to the consumers of the state. On the other hand, Alaska's very unique of all 50 states - or at least 49, or for the south 48 - inasmuch as we do share with Hawaii uniqueness - we're not on a national grid. We're not connected with the other grids for wholesale receipt of power and ability of an electrical retailer to be able to take power and move it from one area to (indisc.) to supply power along the power lines in a particular location. That's unique." CHAIRMAN ROKEBERG pointed out that Alaska's Senator Frank Murkowski is the Chairman of the Committee of Energy in the U.S. Senate which has the oversight and responsibility to move on national legislation regarding this issue. He believed that Senator Murkowski was waiting for the various 50 states in the union to take up the matter and provide some direction for the national policy. He asked committee members to give their attention to this particular issue because it's of major importance to the economic well-being of the state. Number 1215 REPRESENTATIVE RYAN commented that he, too, has done a lot of research on this issue and comes from a free market standpoint, but as Chairman Rokeberg said, Alaska is a horse of a different color. He said if Chugach Electric is allowed to move in and cherry pick Municipal Light and Power, the people in Anchorage who are not (indisc.) Chugach will have to pay the infrastructure costs for the municipal light and power and when the cherry picked customers are gone, those costs will rise appreciably. He said there doesn't seem to be a way to factor this in, and he wondered who will pay for the lights, poles, generators and the rest of the debt service while someone else is taking the cream off the top. He personally didn't see an equitable solution to the problem and so necessarily, it's going to be a hard sell to convince him this should be allowed to happen. In fact, conversely, he personally would say the APUC should be instructed to ensure that it doesn't happen. The situation is ripe for Chugach Electric to do a possible takeover of Anchorage Municipal Light & Power (AML&P) simply by taking the cream off the top, lower the price, then drive the costs up for AML&P and Chugach Electric could take it over at their price, thus decreasing the competition. Number 1314 CHAIRMAN ROKEBERG pointed out the current phenomena called "resalers" and these activities are occurring right now without real regulatory control or any statutory framework for it. He added it's important to keep in mind what's happening in terms of technology. One is that right now, the (indisc.) corporation will deliver to a job site a fully integrated generator system with a gas fired turbine that will be capable of providing the power to small business operations like McDonald's free standing restaurants, et cetera, which basically allows the business to not hook up to the local utility. Additionally, in the Glennallen area, there are electrical generations with even waste heat elements from diesel powered type stations providing electrical and (indisc.) heat to individual businesses. Number 1396 REPRESENTATIVE RYAN pointed out that Representative Barnes' brother works for a company in Tennessee who receives eight or ten bids in the mail for a certain amount per kilowatt from various entrepreneurs, some of whom wouldn't recognize a generator if they saw one, but they buy power from wholesale lots and resell it. It's a pretty small marketplace, but it's high volume so there's quite a bit of money made on it. In his opinion, it's important to take a look at the infrastructure costs. Number 1455 CHAIRMAN ROKEBERG noted there were a number of individuals wishing to testify. He asked Eric Yould to come before the committee to present his comments at this time. Number 1465 ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association Inc. (ARECA), said ARECA is the trade association that represents the electric utility industry in the state of Alaska. He noted that Chairman Rokeberg had addressed where the industry is today, and he would add a few remarks on where Alaska stands in terms of other states and what's being done. Number 1530 MR. YOULD said, "Everybody knows that we've seen deregulation at the gas line industry, airlines, telecommunications and we've seen some quantum leaps in the technology associated with telecommunications. I'll leave it up to some of the other utility managers that are on teleconference today to discuss the viability of some of the electrical generation options that we're going to see in the future. There will be some break throughs, but I think we'll find that they're going to be much slower in coming than what we've seen in the telecommunications industry, where we've seen fiber optics and cellular technology brought to the fore. We're still basically a hard wire technology with feed stock and heavy (indisc.). So, we'll see some efficiencies, but we're not going to see the quantum leaps that we've seen transform the telecommunications industry. Nevertheless, Congress is very interested in seeing deregulation in some form come to the United States, and as a matter of fact, they have been working on it themselves for a number of years. It had been hypothesized that at least two years ago, some form of electric utility deregulation would have passed Congress mandating some form of deregulation for all states, but that still hasn't happened and it's probably not going to happen this year either. Be that as it may, with the prospect of deregulation coming along, the various states have attempted to address the issue over the years so that they will be ready when the federal legislation ultimately comes." MR. YOULD pointed out that ten states - generally with high cost power - have passed some form of deregulation law. Nine states have basically required their respective public utilities commission implement some form of deregulation with statutory guidelines passed by the legislature. Twenty-three states have embarked on - many of them for a number of years - the process that HCR 34 is attempting in the state of Alaska; that is, figure out how deregulation in their state is unique, how it would work and in what fashion it should be brought to their state. It is his understanding there are nine states doing nothing on deregulation at the present time. So the state of Alaska, despite the fact that many of the other states have been working on this for a number of years, is really just now getting into it and in some respects, there's some valid reasons for that. MR. YOULD further stated in the Lower 48, 75 percent of the electric utility generation comes from investor-owned utilities. Those utilities are in the business of competing. They have a very integrated electric transmission grid system throughout the Lower 48 with multiple providers of electricity and major power marketing entities that can move power around the United States. The state of Alaska on the other hand, has a very weak inter-connected railbelt system and there's virtually no inter-connection in rural Alaska. Within the railbelt area, there are three major providers - Golden Valley Electric, Chugach Electric and Anchorage Municipal Light and Power. Also, unlike the Lower 48 where 75 percent of the power comes from investor-owned utilities, despite the fact that Alaska has some extremely good investor-owned utilities in the state of Alaska, only 9 percent of our generation comes from investor-owned utilities. The rest - or 91 percent - comes from consumer-owned utilities; either municipal or cooperative. So in many respects, we're already the owner of the resources that we're using to generate power and would like to believe their main incentive is to provide the lowest possible costs of power for consumers. MR. YOULD said be that as it may, because of the desire to see competition in the Anchorage area, he would have to say the prospect of deregulation has come to Alaska. Not only that, in August, Senator Murkowski addressed the electric utility industry and basically said it's coming on a national basis and he strongly urged the electric utility industry to craft what deregulation should look like for the state of Alaska and having done that, he could work with that to make sure the federal legislation will complement Alaska's prerogatives. Number 1710 MR. YOULD explained that as a result, ARECA's board of directors had a policy planning discussion the previous fall after several attempts to come up with some sort of consensus on what everyone wanted in the area of deregulation, and adopted a single resolution, a result of 11 different options, that reads as follows: Introduce legislation which reaffirms exclusive service areas for electric utilities for the immediate future, that also contains legislation resolutions forming a blue ribbon committee composed of legislative and electric utility representatives which would be directed to investigate whether, and if so, under what circumstances wholesale and retail competition is in the best interest of consumers in the state of Alaska and report back its findings and to draft legislation for introduction to the legislature by the year 2000. MR. YOULD said the resolution was adopted on a vote of 18-1; Chugach Electric was the dissenting vote because they would still like to proceed into deregulation immediately. MR. YOULD concluded that HCR 34 sets up a legislative subcommittee - it's different from ARECA's resolution in that they would like to have utility representation on the proposed joint committee. He encouraged the establishment of a subcommittee in which the utility industry would have more access to the committee. In addition, HCR 34 establishes a 20-month period of time to address what is a very complex issue - an issue to which other states have dedicated two, three and four years. He said those are the two primary differences in the resolutions; a third difference is the purpose of the subcommittee recommended by ARECA would be to look at under what circumstances, and if deregulation is even appropriate for the state of Alaska. He remarked that it is a very complex issue and individuals appointed to the proposed joint committee will have to deal with new buzzwords like "market power," "reliability," "uniform standards and information," "predatory pricing," "cherry picking," "universal service," "standard costs," "tax exempt status of financing" and "unregulatory monopolies." He said the utility industry is prepared to take a hard look at restructuring and wants to ensure that all consumers benefit from restructuring; not just those with economic clout. MR. YOULD advised committee members the general manager of the Ketchikan Public Utilities was unable to attend this hearing and had requested that Mr. Yould distribute his letter supporting HCR 34. REPRESENTATIVE COWDERY referred to Mr. Yould's statement that Chugach Electric had been the one dissenting vote and asked if everyone had equal voting; not based on the number of people supplied. MR. YOULD affirmed that. He said each utility has one vote, probably to the chagrin of those utilities with substantially more customers. Number 1913 CHAIRMAN ROKEBERG explained the reason the legislature didn't select the year 2000 is because this is an important issue and the fact is, this committee, as well as the Senate Labor & Commerce Committee has been working on this issue for a couple years already. Number 1965 CHAIRMAN ROKEBERG thanked Mr. Yould for his testimony and asked Don Edwards from Anchorage to testify at this time. Number 1980 DON EDWARDS, General Counsel, Chugach Electric Association, testified via teleconference from Anchorage and said he'd like to address two general areas. First is the respectfully suggested changes to HCR 34 and secondly, to address some of the previous comments. He noted that Mr. Reinwand was attending the hearing and had a couple of suggested amendments for HCR 34. He stated Chugach Electric's position is that no additional legislation is required because it is their view the customers already have the right to choose; that is to say the legislature has never taken away the right of customers to choose their electric supplier. And so whether or not legislation is required depends on whether an individual agrees with that view or not. He said that question has been posed to the commission. He explained that Chugach Electric Association feels this is very important. Therefore, the substance of the first amendment suggests the committee ask the commission to move on those matters pending pertaining to competition. He was of the opinion the joint committee would have a difficult time accomplishing its goals until it is determined exactly how the commission feels about its own authority; specifically, has the legislature acted to prohibit competition already or not. If the commission takes the position that the legislature has already prohibited competition - unless until the APUC authorizes it - then the legislature will have to consider whether or not it wants to change legislation to make it clear that competition is not prohibited. If, on the other hand, the commission's decision is the legislature has never prohibited competition, the joint committee will either need to stop competition before it gets going or by explicit legislation. He pointed out this is the basis for the suggested changes on HCR 34. Additionally, he referred to page 2, line 10, and recommended deleting "whether and how" and insert, "any additional legislation needed". The wording of the final resolve would then read: "Further resolved that the joint committee shall provide to the legislature written recommendations on any additional legislation needed to implement electric utility restructuring in Alaska." This would leave it open for the joint committee to respond to whatever view the commission has of its authority under existing legislation. CHAIRMAN ROKEBERG said he didn't necessarily agree with Mr. Edward's last suggestion because he felt it was broad enough for the committee to do whatever it deems necessary. Number 2233 MR. EDWARDS further said, "If I might I'd like to shift to the second portion of my testimony just briefly to address the cherry picking issue because I think it's a critical issue - everyone I've talked to - not everyone, but nearly everyone initially had their concern about cherry picking and I think it's a legitimate concern. But let me tell you why, at least why we at Chugach do not think it's a problem. It's only a problem if you don't allow all customers to have a choice. If you allow all customers to have a choice, then it's not possible for the problem to develop that Representative Ryan described. If there are -- let's just assume that one utility is successful at cherry picking another utility's large customers and then if that utility that has lost the large customer attempts to raise prices to the remaining customers, those customers will also leave. So it will not be possible to raise those prices. Now, if there in fact are stranded investments that need to be dealt with, the commission is fully empowered to deal with that issue and we're prepared to make suggestions to the commission on how they might deal with that. It's entirely possible that Chugach might have stranded investments in that event - we don't really know. Although we are very clear on the idea that stranded investments must be truly stranded and they must be stranded as a result of the competition and there should be no game playing there to try to shift costs on the customers that don't belong. If you want local utilities - that is utilities in Alaska to survive, we feel very strongly that it's important that we all be given a chance to compete. Now we recognize that most - in fact all the other utilities that we've come across - disagree with us on that. But we feel very strongly that if we're going to learn to compete, then compete so that we can meet the competition that is already occurring in Anchorage and is likely to intensify as restructuring develops. We feel that we need to have the opportunity to learn how to do that and the only way to do that is to begin competing. I want to clarify that Chugach has never presumed to tell anyone outside the railbelt (indisc.) how they should do anything and we've always attempted and we've always been willing to let the competition at least (indisc.) to Anchorage and certainly have not made any presumptions to tell people in outlying areas that are not inter-connected to the grid how the competition should or shouldn't draw on their system." MR. EDWARDS agreed that Alaska is different, but he said it's different because it's much simpler here. He said, "We have a couple customers in ML&P service territory that requested service. It's a relatively simple matter to serve them - it's not complicated by poles of electricity or a map of an inter-connected grid across the entire western half of the United States or anything like that. We have a thin, small system that is very simple to understand and it's very simple to (indisc.)." MR. EDWARDS said the committee is likely to get input and the people who are unhappy about this or made uncomfortable about this are the other utilities, which is understandable. Chugach Electric Association certainly isn't comfortable with change, but they are approaching and dealing with the changes coming into the industry differently. He said the committee will hear almost exclusively from other utilities, but Chugach Electric Association requests committee members not to forget the recent poll results they conducted. Arguments can be made about whether or not the questions were correct, but by any measure - 92 percent of the Anchorage population of the whole believed they deserve a choice and Chugach Electric agrees with them. Number 2167 CHAIRMAN ROKEBERG thanked Mr. Edwards for his comments. REPRESENTATIVE COWDERY asked Mr. Edwards if some type of authority should make the choice on the cherry picking decision. MR. EDWARDS replied that Chugach Electric believes quite strongly that to the greatest extent possible, circumstances should be set up so that government entities or authorities are not determining who gets to buy from whom. In their view, the better choice is to develop a system that has good incentives and which allows customers to choose and make economic choices which then businesses respond to. REPRESENTATIVE COWDERY asked if Mr. Edwards was implying there was no need for the Alaska Public Utilities Commission to exist? MR. EDWARDS replied, "No, I think there's a role for the [Alaska] Public Utility Commission and in fact, I think the legislature has already set out by statute exactly what that role should be. What the legislature has said is that if competition occurs - in other words if it's already going - and if the commission finds that it's not in the public interest, then the legislature has already empowered the commission to step in and take measures to deal with that. We do not believe that the legislature has issued a blanket prohibition against competition and that's what the argument is about that's in front of the commission right now. So, we do believe that there's a role for the commission - in particular there's clearly a role for the commission in setting rates. And that's exactly what we've asked the commission to do with respect to ML&P. The reason we aren't able to serve MLP customers right now is because ML&P will not allow us to have access to their customers and will not establish a rate for us to get to those customers over their system. We're not proposing any kind of duplication of physical plant; we're simply proposing that we pay (indisc.) a fair price. Again, which is a relatively simple matter to figure out." TAPE 98-44, SIDE B Number 0010 CHAIRMAN ROKEBERG .... interpretation of Alaska statute by prohibiting competition any where within that particular boundary." He asked if that was a fair description or had Chugach Electric changed its approach since that conversation. MR. EDWARDS said Chugach Electric is willing to go with a result that results in competition just within the Anchorage area; specifically, within Anchorage Municipal Light and Power and Chugach Electric Association's existing distribution service territories. Philosophically, Chugach Electric believes that competition is the best way to go and believes that it's better for the utilities if all are exposed to that competition sooner rather than later. CHAIRMAN ROKEBERG expressed his appreciation to Mr. Edwards and said he looks forward to working with him on this issue in the future. He asked Robert Grimm to present his remarks at this time. Number 0053 ROBERT GRIMM, President, Alaska Power and Telephone Company (AP&T), came before the committee and said AP&T is a small investor-owned utility and a contributing member to ARECA, which means they receive benefits from ARECA, but don't vote. Alaska Power and Telephone serves 28 communities from Allakaket down to Hydaburg; primarily along the eastern boundary of Alaska. These are small communities that are electrically isolated from one another which is something that should be looked at very carefully if there's another utility company thinking of competing with AP&T. He said this is going to be a difficult decision on how, where, when and if competition is allowed in the electric utility. He supports legislation to create the joint committee because it is his belief that's what needs to be done to get enough knowledge on the table to be able to make an informed decision. Number 0105 CHAIRMAN ROKEBERG noted that AP&T is rare in terms of being an investor-owned utility and inquired as to the number of customers served by AP&T. MR. GRIMM replied about 6,000. CHAIRMAN ROKEBERG inquired if it was mostly diesel generated. MR. GRIMM said it was mostly diesel, but they have two hydros - one on Prince of Wales and two in Skagway. CHAIRMAN ROKEBERG thanked Mr. Grimm for his testimony and said the committee would now hear from Mr. Roberts. Number 0133 JIM ROBERTS, General Manager, Cordova Electric Cooperative, testified via teleconference from Cordova in support of HCR 34. He echoed the comments of Eric Yould and Bob Grimm. He said Cordova Electric Cooperative is an isolated system, predominately diesel generation with one small hydro and working on getting another one built. He said their industry is fishing based and they are concerned about the possibility of another utility coming in under this restructuring and being able to cherry pick their large loads. In his opinion this is something the committee needs to address, especially in rural areas. He noted this is definitely a concern of the rural consumers and was a topic of discussion at the recent annual meeting. CHAIRMAN ROKEBERG thanked Mr. Roberts for his testimony and expressed that he enjoyed visiting Cordova and speaking at the ARECA convention on this issue last August. He called on Robert Wilkinson to present his remarks at this time. Mr. Wilkinson was unavailable and had requested Colleen Granger to read his statement into the record. Number 0205 COLLEEN GRANGER, Manager of Member Services, Copper Valley Electric Association, testified via teleconference from Valdez. She read the following statement on behalf of Robert Wilkinson: Thank you, Chairman Rokeberg and members of the committee for allowing me to testify today on this very important issue. As I said, my name is Colleen Granger and I am speaking for Robert Wilkinson who is the general manager of Copper Valley Electric. Copper Valley is a rural electric cooperative serving approximately 3,200 customers in a geographic area roughly the size of West Virginia. We began preparing for competition in November of 1996 when we adopted a new issue statement which is to be the power supplier of choice within our service territory. We know being the chosen provider means being the low cost provider and since adopting our new mission, we have filed a rate change with the Alaska Public Utilities Commission to bring our annual revenue requirement down by $800,000 which is a reduction of approximately 7 percent. Basically, we have and will continue to inject the profit motive into our nonprofit electric cooperative so those profits can be in the form of lower electric rates. We are very concerned, however, as to what impact industry restructuring will have on our efforts to maintain competitive rates. Restructuring is sure to create opportunities for some and unless done carefully and correctly will surely create hardships for others. Alaska's electric cooperatives have faithfully and capably served this state for over 50 years. As we travel the road toward industry restructuring, we must be cautious and deliberate in our actions so as not to upset the carefully balanced system which has been built over these years. Alaska is unique among the nation's utility systems and Alaska's cooperatives are also unique. Restructuring is an extremely complex issue which must be carefully studied and thoroughly understood to ensure financial and electrical impacts to customers are known before they occur. I would like to commend the legislature for the foresight in forming this committee to study the issues before making a decision. I am concerned that the time provided for in HCR 34 for the committee to do their work may be inadequate to properly address the many complex issues surrounding restructuring in Alaska. At a minimum, any restructuring legislation must address stranded investment, cost recovery, reliability, safety standards, rate impacts to all utilities and all customer (indisc.), necessary customer education and an adequate transition period into the new competitive environment. We urge the legislature to proceed carefully and diligently to ensure that we proceed in a thoughtful manner and that the best interest of all Alaskan consumers are preserved. Thank you very much, folks. CHAIRMAN ROKEBERG thanked Ms. Granger for her comments and called upon Norm Story to testify at this time. Number 0330 NORM STORY, Manager, Homer Electric Association, testified via teleconference from Homer in support of HCR 34. He didn't feel it was necessary to expand on the previous comments regarding the uniqueness of Alaska and why it's important to be very careful before employing competition within the state. He said Homer Electric Association provides electrical service to approximately 17,000 members on the Kenai Peninsula. Homer Electric is very concerned about opening electric competition within their service territory without first closely studying its effect on the majority of electric users which could result in increased rate. He said Homer Electric Association believes that HCR 34 provides for such a study, but would like to see more time allowed for the study. CHAIRMAN ROKEBERG pointed out that by bringing a report back to the first session of the Twenty-First Legislature, it's possible that it could be finalized in the second session if there are any statutory requirements to be changed. He asked Robert Hansen to present his remarks at this time. Number 0417 ROBERT HANSEN, Chief Financial Officer, Golden Valley Electric Association (GVEA), testified via teleconference from Fairbanks in support of HCR 34. He said Golden Valley Electric Association serves about 36,000 consumers. The GVEA recognizes that restructuring is a very complex issue and as it has been pointed out, Alaska is not like the Lower 48 by having limited generation resources and providers limited inter-connection, and Alaska has primarily cooperatives and municipals. Most of their concerns have already been addressed; primarily the stranded cost issues, liability issues, access issues and certainly cherry picking. He thanked the committee for the opportunity to speak in support of HCR 34. Number 0462 CHAIRMAN ROKEBERG called on Charles Walls to present his testimony at this time. Number 0486 CHARLES WALLS, President, Alaska Village Electric Cooperative, testified via teleconference from Anchorage in favor of HCR 34. He said it is imperative the legislature carefully consider all the ramifications of restructuring the electric utility industry. He said, "You've heard quite a bit of testimony about some of the major concerns of some others that are a little bit unique to the area I serve which is village Alaska is perhaps just an amplification of what you've heard. When you have just one or two large customers and a handful of houses in a typical village that's totally isolated from anywhere else, it becomes very apparent that the feasibility of that electric utility could be very easily destroyed by another (indisc.) coming in and cherry picking, particularly if that competitor is not willing to take on the social responsibility that a public utility has to bear - that is, where we are obligated to provide electric service by law, some of our competitors don't want to carry that burden." He said if the issues are looked at, he believes the legislature will find that it doesn't make sense to open rural Alaska up to competition. He noted the telephone industry discovered that same thing when going to deregulation of telephone service. In fact, because of these small, unprofitable service areas, that industry created what's referred to as a universal service fund to ensure that everyone would have access to affordable service. He said those are some of the issues faced in rural Alaska, particularly village Alaska, and those complex issues need some study before restructuring. He reiterated his support for HCR 34 and encouraged committee members to take some time to focus on this important issue. CHAIRMAN ROKEBERG asked if there were any questions of Mr. Walls. Hearing none, he called on Meera Kohler to present her testimony. Number 0599 MEERA KOHLER, Representative, Anchorage Municipal Light & Power, testified via teleconference from Anchorage. She said the introduction of HCR 34 comes at a very momentous time, especially in light of the very recent introduction of the President of the United States' Comprehensive Electricity Competition Plan. She offered to make copies of that plan available to committee members, if necessary. She said item 1 of the President's plan encourages states to implement retail competition on a sensible mandate. It specifically urges states to carefully craft a plan to (indisc.- coughing) retail competition would best be implemented in each state. She said the uniqueness of Alaskan conditions must be taken fully into consideration before any sweeping measures are taken to rush the state into retail competition. It must be recognized that any assets that might become stranded through deregulating the industry belong already almost entirely to the people of the state of Alaska; either cooperative members or municipal taxpayers. It must also be noted that despite a single utility's (indisc.) call to immediately open the Alaska urban electricity market to competition, the (indisc.) of retail wheeling is not yet in place. Our fledgling transmission system that ties the railbelt utilities together is still undersized and controlled by a single utility. Until that transmission grid is operated by an independent operator, the utilities cannot possibly compete for retail customers. MS. KOHLER continued that as this committee convenes to address the enormous task that lies ahead of it, the municipality of Anchorage urges that provision be made to include industry representatives into the deliberative process. The municipality also urges the committee allowed the flexibility to take the necessary time to fully address the many complexities of the issues involved. It must be noted that the wholesale wheeling mandated by (indisc.) Act of 1992 is not yet in place in Alaska six years later. California which was the first state to implement retail wheeling and has only just started, has taken over four years to reach this stage and numerous glitches still remain to be worked out. It's imperative though to recognize that Alaska was the forty-ninth state to join the union for good reason. Our conditions - geographic, demographic and climatic are unique. Our population is small and widely dispersed. We have minimum transportation routes to use, both land based and energy wise. When a 60-megawatt generator coughs, the frequency from Fairbanks to Anchorage to Homer takes a hit. Alaska's problems and solutions have always been unique to our state. She urged the committee to give this extremely critical issue their closest scrutiny and fastest solution that will serve all Alaska's electric consumers well now and in the future. Number 0721 CHAIRMAN ROKEBERG remarked the reason why the scope of membership of the joint committee hasn't been broadened in the resolution is that in order to do so, it would incur a fiscal or financial obligation to the communication and transportation of those members. He fully expected that everyone wishing to testify or having input into the committee would be more than welcome to participate. He asked if there was anyone else wishing to testify on HCR 34. Hearing none, he closed public testimony and called an at-ease at 4:23 p.m. CHAIRMAN ROKEBERG reconvened the House State Affairs Committee at 4:35 p.m. He directed committee members attention to the proposed committee substitute. Number 0792 REPRESENTATIVE COWDERY made a motion to adopt proposed committee substitute, Version 0-LS1639\B, Cook, 4/6/98, as the working draft, CHAIRMAN ROKEBERG asked if there was any objection. Hearing none, that version was before the committee. He explained the difference between the two versions is the language on lines 10, 11 and 12 of Version E has been deleted. Number 0824 REPRESENTATIVE TOM BRICE made a motion to amend the language on page 2, line 5, to read following committee, ", and ARECA shall appoint an equal number of participants from their membership and they will be required to cover their own costs." He said the idea is to have ample representation from a wide range of people involved with the issue to provide the legislature with grounding in some of the realities of the industry. CHAIRMAN ROKEBERG asked if there was objection. REPRESENTATIVE COWDERY objected for discussion purposes. He asked Representative Brice what he envisioned the total membership to be. REPRESENTATIVE BRICE said it would be completely dependent upon the presiding officers' determination. For example, if there's five members from each body [House and Senate], then there would be ten appointments from ARECA's membership. He reiterated his concern that there be equal representation on this joint committee to include people from the industry who deal with the day-to-day issues. Number 0928 REPRESENTATIVE COWDERY expressed concern about getting a quorum. He believed that by forming a joint committee, members of the industry would show up and participate at their own expense. CHAIRMAN ROKEBERG agreed with Representative Cowdery's comments with regards to the interest of the industry and participation in the testimony to provide the necessary information for the committee to make any recommendations to future legislatures. He said, "Point in fact is, for the record, the reason we have an indeterminate number here is that because it is an election year and this is a very important issue, I'm not sure how many people would be available to serve and therefore don't want to tie the presiding officers to a specific numeric plateau in which they may or may not be able to achieve of people interested in serving on this committee...." REPRESENTATIVE COWDERY remarked that perhaps the committee should include members of the minority. REPRESENTATIVE BRICE said the make up of standing committees is based on the Uniform Rules and it may be possible to figure something out, using the Uniform Rules as a guideline. REPRESENTATIVE COWDERY remarked he did not have any problem with that, but was of the opinion the committee should be kept to a small number of members while still allowing industry members to participate in the process. CHAIRMAN ROKEBERG asked if the objection was maintained to the proposed amendment? He objected to the amendment, also. Number 1096 REPRESENTATIVE BRICE withdrew Amendment 1. Number 1098 REPRESENTATIVE BRICE made a motion to adopt Amendment 2 on page 2, line 8, to delete "First" and insert "Second" to provide additional time for the committee to do its work. CHAIRMAN ROKEBERG objected. Number 1139 REPRESENTATIVE BRICE said this amendment speaks directly to one of the recommendations made. He maintained that much of the attention and focus of legislators is going to be drawn elsewhere during this upcoming interim and the joint committee is going to be hard pressed to devote the attention this issue needs. CHAIRMAN ROKEBERG said his comments in opposing the amendment are very practical in nature. He agreed the amendment was consistent with one of the recommendations by ARECA, but the reason for his disagreement with the amendment is because there will be an election which means a new legislative body when the Twenty-First Legislature reconvenes and some members of the committee may not even be members of the legislature. And therefore, the presiding officer will have to reconstitute the committee which may be somewhat problematic at best. Number 1234 REPRESENTATIVE BRICE remarked the flip side of that is perhaps the leadership of the legislative body may change and there will be no "buy-in" by the next leadership on this process and therefore no compelling desire or interest to take action on the joint committee's recommendations. He said everyone recognizes that it's too late to get any legislation or recommendations in this session, so any recommendations will have to go through a completely reorganized house. He felt it important the reorganized legislature should have buy-in to the process. He said it's going to be difficult either way. CHAIRMAN ROKEBERG asked for a roll call vote. Representatives Sanders and Brice voted in favor of the amendment. Representatives Rokeberg and Cowdery voted against the amendment. The motion failed by a vote of 2-2. Number 1360 REPRESENTATIVE BRICE made a motion to amend the language on page 2, line 10, following restructuring, insert "and under what, if any, circumstances it is appropriate". The last resolve would then read: "Further Resolved that the joint committee shall provide to the legislature written recommendations on whether and how to implement electric utility restructuring and under what, if any, circumstances it is appropriate in Alaska." CHAIRMAN ROKEBERG objected for discussion purposes. He asked Representative Brice to explain the overall goal of the amendment. REPRESENTATIVE BRICE said there has been public testimony indicating that it may not be appropriate to do a wholesale restructuring in Alaska. It may be appropriate to have restructuring in the Anchorage Bowl for example, but not necessarily in the rest of the state. The goal is to clarify that given the diversity in the electrical utilities within the state, some places it may be appropriate in some places while it may not be in others. REPRESENTATIVE COWDERY noted that Representative Brice had indicated it might be in Anchorage, so should the two utilities in Anchorage make the determination or should all the utilities be involved in the determination. REPRESENTATIVE BRICE suggested that would be the function of the joint committee. CHAIRMAN ROKEBERG said he understood what Representative Brice was attempting to do, but he felt the charge to the legislature is clear and the amendment would make the legislation more vague. He felt the "what, if any" was covered in the "whether or how" is .... REPRESENTATIVE BRICE said, "...I was saying I wasn't quite sure - I just saw the CS [committee substitute] when we were coming in, so I was wondering how I could encompass that as to -- there's another factor here, not only on just whether and how, but I think that those relate to -- I mean, is it possible? Yes, it is possible. Is it appropriate? We don't know. If it's practical and it's appropriate - even beyond practicality -- so that third factor .... CHAIRMAN ROKEBERG said he would maintain his objection and asked for a roll call vote. Representative Brice voted in favor of Amendment 3. Representatives Rokeberg, Sanders and Cowdery voted against Amendment 3. Amendment 3 failed by a vote of 1-3. Number 1684 CHAIRMAN ROKEBERG called an at-ease at 4:53 p.m. TAPE 98-45, SIDE A Number 0010 CHAIRMAN ROKEBERG called the meeting back to order at 4:54 p.m. REPRESENTATIVE BRICE moved Amendment 4 on page 2, line 3, following joint committee, insert "in accordance with the Uniform Rules,". Page 2, line 3, would then read, "Representatives and of the Senate to serve on the joint committee in accordance with the Uniform Rules, and that the Speaker of the". CHAIRMAN ROKEBERG asked if there was objection to Amendment 4. Hearing none, Amendment 4 was adopted. Number 0047 REPRESENTATIVE COWDERY made a motion to move CSHCR 34, Version 0- LS1639\B, Cook, 4/6/98, as amended from committee with individual recommendations and attached zero fiscal note. REPRESENTATIVE SANDERS objected. It is his position that HCR 34 should be held in committee for further discussion at the next meeting. CHAIRMAN ROKEBERG asked for a roll call vote. Number 0192 REPRESENTATIVE BRICE referred to the objection, and said he did not intend to move this bill out of committee at this time because he believed issues had been raised that needed to be addressed; e.g., the time line, industry representation, et cetera. Number 0251 CHAIRMAN ROKEBERG requested a roll call. Representatives Rokeberg and Cowdery voted in favor of moving the bill out of committee. Representatives Sanders and Brice voted against the motion. Therefore, the motion failed by a vote of 2-2. HB 479 - RECOGNITION FOR EMPLOYERS OF ALASKANS Number 0302 CHAIRMAN ROKEBERG announced the next item on the agenda was HB 479, "An Act relating to recognition of employers who hire Alaskans." He asked Ryan Kegley, his Legislative Secretary, to read the sponsor statement for the record. Number 0397 RYAN KEGLEY, Legislative Secretary to Representative Norman Rokeberg, Alaska State Legislature, read the following statement: Alaska Department of Labor statistics show that about one-third of job openings went to out-of-state workers in 1996 and companies in Alaska paid total wages topping $900 million to nonresidents. Between 20,000 and 30,000 Alaskans were unemployed in any given month in 1996 while 52,000 nonresidents gained employment in the state. House Bill 479 is intended to induce companies to hire within the state by awarding those who meet Alaska Department of Labor criteria with an "Alaska Hire" seal, modeled after the highly noticeable "Made in Alaska" logo. House Bill 479 will help state initiatives to curb out- of-state hires, such as the State Training and Employment Program which trains workers with an emphasis on occupations with high nonresident hire, by giving companies an incentive to hire Alaskan workers. Nonresidents often spend portions of their wages in their home state, decreasing the multiplier effect and depriving Alaska of the full economic benefits of the employment created in Alaska's economy. An Alaska Department of Labor analysis shows that nonresidents who spend even one-quarter of their earnings outside Alaska take away $100 million to $200 million from the state economy over and above the direct income loss to Alaska. Display of the "Alaska Hire" seal by Alaskan businesses will confirm their commitment to the employment of the citizens of this state and the economic health of Alaska. Number 0522 CHAIRMAN ROKEBERG asked Mr. Kegley to explain HB 479 in his own words, as well as the changes in the proposed committee substitute. MR. KEGLEY said basically HB 479 attempts to allow for the public display in businesses as well as on publications and letterheads, a seal that shows that businesses hire a certain percentage of Alaska employees. The criteria for determining an Alaska employee is set on a two-year residency based on the permanent fund dividend (PFD) formula used by the Department of Labor in the analysis of resident versus nonresident hire in companies. House Bill 479 not only allows for an incentive to hire an Alaskan employee to obtain the "Alaska Hire" decal, but it also allows Alaskans, as residents, to choose the business at which to shop. Number 0605 MR. KEGLEY explained the proposed committee substitute 0-LS 17919\B, Cramer, 4/3/98, sets out the criteria for determining an Alaska employee in subsection (g). Also, on page 1, lines 11-12, it deletes language in the previous draft relating to the use of the seal on items made by Alaska employees. He said that is the "Made in Alaska" logo, so the language was deleted in an effort to avoid confusion between the "Alaska Hire" program and the "Made in Alaska" program. CHAIRMAN ROKEBERG reiterated the idea is to have a seal or decal to display on various items, and in no way is it meant to be in competition or to denigrate the "Made in Alaska" logo. CHAIRMAN ROKEBERG called on Ed Flanagan from the Department of Labor to testify at this time. Number 0718 ED FLANAGAN, Deputy Commissioner, Department of Labor, said the department supports the concept of HB 479 and in fact, is something the department has considered; however, the department has some concerns. He said, "As you all well know, any time we talk about resident hire, we get into a pretty prolonged debate on what's a resident, how are you going to enforce -- to the extent that any program like this would just piggyback on efforts that we're already doing, like our annual report to the legislature and you provided those outside to the public - and an offshoot of that, by statute, we report to the legislature every year on nonresidents working in Alaska - we do what we call the employer report card. And all employers with 20 or more employees - and the reason we seized on 20 - I believe, that was by regulation - was to give some anonymity to it. It was felt that if you have an employer with 18 and reported that 16 of them were nonresidents, it might violate confidentiality. Anyway, this is just under 4,000 employers and it's a cross match of the UI [unemployment insurance] - the wage files the employers report quarterly for the employees that worked for them and we match that - in this case for 1996, which is the report we just put out in January - we matched that with their files with anyone who had applied -- received in '96 or applied for a PFD in '97. By using the applicant file from the previous year, we bring it forward -- it's not really a two-year requirement. In an extreme case, if someone arrived in the state after January 1, 1996, and was not eligible to apply in '97, they would show up as a nonresident. But at any rate, we do this reporting and we could probably extrapolate some percentage. We would rather frankly in this case - and I see one amendment that the Chairman I believe has proposed specifies a minimum of 80 percent - one of our concerns -- we'd just as soon have the parameters laid out in the legislation rather than go through a regulation process. And some number - probably we could do something like 90 percent or better and then maybe allow for improvement." MR. FLANAGAN continued, "Just a run through real quickly - I understand time is late - but some of the concerns -- and a couple of them have been addressed in your CS -- just want to bring to your attention, we could have a problem in -- I'm the one who gets these phone calls just as Mr. Kegley probably would for the Committee Chair after this law is in effect -- and the kind of things we'll be hearing about. For example, a company that has five divisions and the holding company over all of them is their corporate headquarters in Anchorage. They might have 38 employees and 35 of them are Alaskan, so they're over 90 percent - maybe we'd give them an award. But then they have subsidiaries - they're operations or they're construction companies -- I'm thinking of specific companies -- and they could be as low as 60 percent. But are they going to be able to put on the corporate letterhead the seal of approval and then solicit work for the divisions that only run 60 - 70 percent Alaskan. That's the kind of problems we will have. We don't want to get into a situation where we have a lot of employers saying 'I should get this - I should be able to get this - you're using the PFD -- we hear this a lot from the oil industry that the PFD is too stringent because of the time lag involved and that it takes a year. But actually if you'll look at our report of nonresidents working in Alaska, we track from year to year how many nonresidents one year become residents the next year and over all industries, it's about one in seven that actually become residents." Number 0979 MR. FLANAGAN further stated, "Another concern we have is we'll get people calling up, "So and so has the logo - the decal in their window, and I know for a fact they don't have people and you should go take out their logo -- you know, in those cases, we'll just send Dwight over with a baseball bat to remove the offending window [laughter]. But you know, we've got to have due process and all that stuff -- I don't mean to be throwing cold water on it, it's just these are the things that will come up. The establishment of different levels for different industries - that is doable - you could do somebody who exceeds the industry average or something like that, but the more we add to it, the more labor-intensive it gets. And as far as tracking if someone's making a good faith effort to hire Alaskans - we'd really like to stay out of that. That's kind of subjective and we don't care to get into measuring -- how do we measure for that. So I guess what we'd like to see -- the cost -- I believe our research and analysis branch has been very conservative on the fiscal note and that assumes that we would be able to do things pretty much the way we do them with regard to determining the availability of workers who are able and willing to engage. We do that for our resident hire in construction law - we don't survey a bunch of workers and say if you could work on this, would you? We look at how many people are registered with Job Service in different classifications and what the availability is of people that may be qualified. So, I guess if we could work with the committee, I think on a quick turnaround, if we could get this to be more of a - I guess passive program that takes things we already do, takes the data and then, I guess the committee - whatever your pleasure - if you gave a gold award for 95 percent or better, assuming you could agree that PFD -- and not just qualifying for it - that was one of the changes you made in the CS - and we appreciate that, you know - that they qualify, they satisfy their resident eligibility standards for eligibility in the PFD. We don't want to do a case by case, you know if you have a conscientious objector, like certain legislators who pride themselves on not collecting a permanent fund, and we don't want to have to certify that that person would have gotten a PFD if they applied. We just want to go off the tape that we get from PFD every year that shows who applied." Number 1086 MR. FLANAGAN stated, "Mr. Kegley mentioned in a private conversation that might look at some kind of program receipts authority for this. We would certainly prefer that because any general funds added to our budget, it's going to be up for grabs the next time around. I mean if we have to make a choice between enforcing the law protecting working conditions and workers and doing this worthwhile program, we're probably going to go with that. And we just have to be up front and tell you that. If it was program receipts, we would hope that it would be the new fangled designated program receipts, you know, that only -- you don't do them -- you don't collect them unless you do the activity, so that they're kind of off budget. And I guess I just make myself available for questions. A couple of the suggestions we spelled out was maybe you could have something for over 95 percent, something for 85 - 95 percent; and then maybe -- and this would not be too labor intensive -- if you had an employer -- and in some cases, I mean there are some industries -- in seafood if somebody's doing 50 percent - because there's such a huge influx of seasonal workers, short demand -- if somebody's doing 50 percent in that industry, they're way over the industry average. Maybe you could have like an award for percent improvement year to year. If someone's under 50 percent, they'd have to improve 20 percent to get an award. Between 50 [percent] and 70 [percent], they'd have to improve 15 percent. Between 70 [percent] and 85 percent, they'd have to improve 10 percent. Just throwing those out for suggestions - we only saw this -- I guess we saw it Thursday and we have given it some thought and would be glad to work with committee staff or a subcommittee on a quick turnaround and come up with something that we would feel comfortable telling you it would not just be another thing on the books like the Alaska products preference - the dairy products, the timber products - that are on the books and well-intentioned and maybe when they first started, had a little enforcement money, but are virtually vestigial (indisc.) as far as laws go that just sit there with no enforcement." Number 1198 REPRESENTATIVE SANDERS asked Mr. Flanagan to explain why industries with outside markets like canneries, timber, mining and oil would have an interest in this legislation. MR. FLANAGAN believed there would be a lot of interest as is seen with any discussion on resident hire - the corporate citizen aspect. For example, there's been a lot of discussion with the oil industry on resident hire. There's been a lot of emphasis on the resident hire performance of the offshore and onshore sectors with regard to the pollock allocation. Many industries coming before the legislature for various reasons would conceivably have an interest in having a seal of approval from the Department of Labor. Number 1388 REPRESENTATIVE COWDERY inquired about the constitutionality of Alaskan hire. MR. FLANAGAN replied, "That's a very deep subject. I'll give you the two-minute answer. The Alaska Supreme Court, let alone the federal, have always looked real hard and not too favorably on Alaska hire resident legislation. We've had two mandates in terms of percentages - two laws go down and our last vestige is being challenged as we speak in superior court. That regards public construction projects in the state. However, the Department of Law did look at this one - not saying that somebody couldn't figure out they were aggrieved, but they basically think it's defensible you know, because the withholding of it or the granting is a pretty intangible potential bonus or detriment to somebody. It doesn't mean somebody won't jump up and challenge it. But yeah, the equal protection clause of our own state constitution has for the most part preempted local hire laws before they even get to the U.S. Supremes. It doesn't mean we all can't keep trying though. Number 1455 CHAIRMAN ROKEBERG noted that Representative Sanders needed to leave for another committee meeting, so he would like to adopt the proposed committee substitute, Version 0-LS1719\B, Cramer, 4/3/98, as the work draft while there was a quorum. Hearing no objection, that version was before the committee. Number 1489 REPRESENTATIVE COWDERY asked how the Department of Law defines an Alaskan employer. MR. FLANAGAN said he didn't believe the department had a definition of an Alaskan employer in statute; however, it's defined in other statutes pertaining to the Alaska bidder's preference and the legislature came up with a fairly extensive definition in the North Star legislation. REPRESENTATIVE COWDERY inquired about joint ventures. He's aware of a situation where an out-of-state or out-of-country company attempted to find a small contractor in order to qualify for a particular preference. MR. FLANAGAN said he thought that had been dealt with in amendments made to the North Star legislation. He added, "I don't if it was a -- I know it said at least one of the partners had to meet the full definition and then I've seen other places like when it's an issue of minority contractoring or (indisc.), 51 percent has to be, so I guess you could say 51 percent of the joint venture had to be the Alaskan -- the one that met the Alaskan definition to get away from the kind of front situation you're talking about, Representative Cowdery." Number 1584 REPRESENTATIVE ERIC CROFT stated, "Just on Representative Cowdery's point about the constitutionality - this bill came up as part of a discussion between me and your staff, Mr. Kegley, and later with you, Representative Rokeberg, and Amanda Bohman on my staff, about how we could get around a lot of the things that Ed [Flanagan] was talking about. How we keep putting out or did for awhile, put out local hire laws that kept getting struck down and exactly what could we do that would be on the good side of the law. And this, using by analogy the 'Made in Alaska' buttons and stickers seemed to be one that would pass constitutional muster and that's the preliminary opinion we got from the Department of Law. You can't tell people who they have to hire or for that matter, what products they have to buy. You can reward - you can recognize really - people who do a good job in areas you like and by that way, encourage. You can't mandate. You can't require. It seems to me and it seems I think preliminary to the Department of Law you can encourage through this process so this may be the one avenue we do have to do this kind of resident hire stuff. And the more I look through the data here and before, it does seem like as I've said, that certain industries just have a difficult time or difficult reputation in hiring locally - fisheries, food service, visitors. It seems like the ones that operate in a short time span in the summer have a lot of nonresident hires and whether having them always excluded from the criteria, it seemed to me -- the Department of Labor always does a sort of 'worst' list. It says in each of the industries, here are the ones that don't do as well. You could just as easily, it'd seem to me, do a 'here's the one in each industries that do the best' so you could even have ones in the fisheries that were only hitting 60, but that was so much better than the average of 30 that we did want to recognize them. So, I guess on those two issues -- what's an Alaskan employer, I'd much rather recognize the hires here than some criteria about doing business or licensed in the state - those you can have the kind of sham offices or sham operations. When it really gets down to who are your employees, it seems to me more verifiable and harder to fake." Number 1700 CHAIRMAN ROKEBERG acknowledged Steven Rouse standing by on teleconference to testify. Number 1714 STEVEN ROUSE, Executive Director, Trade Association, Make it Alaskan, Inc.; and Permit Agent and Program Manager for the Made in Alaska Program, testified from Anchorage via teleconference. He said "Make it Alaskan" is a statewide, nonprofit organization whose mission statement is to promote the purchase and use of Alaskan made products and utilization of Alaskan services. The organization has been an active leader in raising the awareness and the importance of the issue of Alaska hire and believes that in a resource rich state, the resident work force is a very valuable resource and one that should be developed to its full potential. He said his second role is speaking as the permit agent and program manager for the state of Alaska's Made in Alaska program, which has been so liberally referred to in the discussions of this bill. He has some serious concerns and questions about HB 479. He had expressed his concerns to Chairman Rokeberg's staff and while he doesn't have a copy of the proposed committee substitute, he understands that a couple of items of concern have been addressed in the committee substitute. MR. ROUSE said it was his understanding there was no fiscal note for this bill. CHAIRMAN ROKEBERG interjected that was incorrect; there was a fiscal note attached. MR. ROUSE said this type of program needs to be funded. There is current and historical evidence that demonstrates that the aftermath of well-intentioned programs enacted without enough funds, let alone just funds, are widespread. He cited several examples of programs that are no longer in existence or close to nonexistent due to lack of funds: the product preference program; the forest products preference program; the recycled products preference; the Alaska grown program, et cetera. He concluded, "We believe that while the bill is certainly well-intentioned, that we believe in it in concept as does the Alaska Department of Labor, for all of the reasons that Mr. Flanagan referred to and then some, we strongly urge this committee to reconsider this bill before passing it out (indisc.-coughing) willing to work with the committee to determine a way in which you could identify and support those people who meet any specific set of criteria. But one who administers and has administered this program that you guys are saying you want emulate, I'm telling you there's a lot to it that you're not recognizing - there's a lot of cost to it that you're not admitting and you're opening up what my experience has been to be a pandora's box of public outcry and consternation over who gets it, why they get, when they get it, who polices this logo by the wayside, is it a copyrighted logo? Given the recent court decision on the use of the state seal under the guise of artistic expression, does this mean that this seal can be used and reused or bastardized, for lack of a better term, by anybody and everybody for commercial means." He stated that if this legislature is looking to advance the concept of results based government and allocate funds and create laws under that principle, he respectfully suggested this legislation is not consistent with that principle. Number 1980 CHAIRMAN ROKEBERG inquired if the committee had any questions of Mr. Rouse. REPRESENTATIVE COWDERY inquired as to the size of the program administered by Mr. Rouse. MR. ROUSE replied the nonprofit organization, Make it Alaska which administers the Made in Alaska program, has an employee and a half and a volunteer staff that extends across the state - volunteer site inspectors, volunteer information and various other activities. More specifically, there are two paid staff and dozens of volunteer staff statewide. REPRESENTATIVE COWDERY inquired as to the number of members. MR. ROUSE replied the Made in Alaska program currently has 1,162 active product lines certified in the program held by 1,018 different permit holders. Number 2051 CHAIRMAN ROKEBERG said that concluded public testimony on HB 479. He requested the Department of Labor work with the bill sponsors on this particular piece of legislation. He remarked that he's not real excited about rewarding businesses that reach 50 percent achievement, even though it is a vast improvement, because the idea is to take pride in the display of a decal or logo. Chairman Rokeberg noted that HB 479 would be held in committee for further consideration. ADJOURNMENT Number 2145 CHAIRMAN ROKEBERG adjourned the meeting of the House Labor and Commerce Standing Committee at 5:33 p.m.