Legislature(1999 - 2000)

03/29/2000 08:02 AM House URS

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
        HOUSE SPECIAL COMMITTEE ON UTILITY RESTRUCTURING                                                                        
                         March 29, 2000                                                                                         
                           8:02 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                                 
                                                                                                                                
Representative Bill Hudson, Chairman                                                                                            
Representative John Cowdery, Vice Chairman                                                                                      
Representative Brian Porter                                                                                                     
Representative John Davies                                                                                                      
Representative Ethan Berkowitz                                                                                                  
Representative Joe Green (alternate)                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                  
                                                                                                                                
Representative Pete Kott                                                                                                        
Representative Norman Rokeberg                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                              
                                                                                                                                
HOUSE BILL NO. 169                                                                                                              
"An Act relating to including the costs of expansion activities                                                                 
and political activities in rates of electric cooperatives."                                                                    
                                                                                                                                
      - HEARD AND HELD                                                                                                          
                                                                                                                                
PREVIOUS ACTION                                                                                                                 
                                                                                                                                
                                                                                                                                
BILL: HB 169                                                                                                                  
SHORT TITLE:ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY                                                                           
SPONSOR(S): REPRESENTATIVE(S)GREEN                                                                                              
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/31/99     0625       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRAL(S)                                                                                  
03/31/99     0625       (H)        URS, L&C                                                                                     
04/28/99                (H)        URS AT 8:00 AM CAPITOL 120                                                                   
04/28/99                (H)        SCHEDULED BUT NOT HEARD                                                                      
05/05/99                (H)        URS AT 8:00 AM CAPITOL 120                                                                   
05/05/99                (H)        SCHEDULED BUT NOT HEARD                                                                      
03/15/00                (H)        URS AT 8:00 AM CAPITOL 120                                                                   
03/22/00                (H)        URS AT 8:00 AM CAPITOL 120                                                                   
03/22/00                (H)        Heard & Held                                                                                 
03/22/00                (H)        MINUTE(URS)                                                                                  
03/29/00                (H)        URS AT 8:00 AM CAPITOL 124                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                                
                                                                                                                                
ERIC YOULD, Executive Director                                                                                                  
Alaska Rural Electric Cooperative Association                                                                                   
703 West Tudor                                                                                                                  
Anchorage, Alaska 99503                                                                                                         
POSITION STATEMENT: Testified on HB 169.                                                                                        
                                                                                                                                
JEFF LOGAN, Staff                                                                                                               
  to Representative Joe Green                                                                                                   
Alaska State Legislature                                                                                                        
Capitol Building, Room 214                                                                                                      
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT: Presented information regarding HB 169.                                                                     
                                                                                                                                
ACTION NARRATIVE                                                                                                                
                                                                                                                                
TAPE 00-7, SIDE A                                                                                                               
Number 0037                                                                                                                     
                                                                                                                                
CHAIRMAN  BILL  HUDSON  called the  House  Special  Committee  on                                                               
Utility  Restructuring meeting  to order  at 8:02  a.m.   Members                                                               
present  at  the  call  to  order  were  Representatives  Hudson,                                                               
Cowdery,  Porter,   and  Green.     Representatives   Davies  and                                                               
Berkowitz arrived as the meeting was in progress.                                                                               
                                                                                                                                
HB 169 - ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY                                                                            
                                                                                                                                
Number 0199                                                                                                                     
                                                                                                                                
CHAIRMAN HUDSON  announced the first  order of business  would be                                                               
HOUSE BILL  NO. 169, "An Act  relating to including the  costs of                                                               
expansion  activities  and  political   activities  in  rates  of                                                               
electric  cooperatives."   [The committee  had heard  the opening                                                               
presentation and some testimony at the previous meeting.]                                                                       
                                                                                                                                
Number 0317                                                                                                                     
                                                                                                                                
ERIC   YOULD,   Executive   Director,   Alaska   Rural   Electric                                                               
Cooperative Association  (ARECA), the  trade association  for the                                                               
electric utility industry in the  state, came forward to testify.                                                               
He noted  that the state's  electric utility industry is  made up                                                               
of about  70 percent electric cooperatives,  20 percent municipal                                                               
utilities,  and   10  percent  investor-owned  utilities.     The                                                               
cooperatives  have done  a  good job  in  providing reliable  and                                                               
affordable   electricity    to   Alaska   citizens,    he   said.                                                               
Nevertheless, he believes that HB 169  appears to be a little bit                                                               
vindictive  toward  the  industry  and attempts  to  curtail  its                                                               
activities.  Specifically, it tries  to preclude expenditures for                                                               
activities related to expansion and political action.                                                                           
                                                                                                                                
MR.  YOULD  pointed out  that  political  activities already  are                                                               
essentially  controlled   by  both  the  Alaska   Public  Offices                                                               
Commission (APOC) and the Regulatory  Commission of Alaska (RCA).                                                               
Expenditures  for political  activities  are not  being put  into                                                               
people's  rate  base, he  stated.    He strongly  suggested  that                                                               
rather than having  it be redundant in law,  the committee should                                                               
delete  subsection (I)  [dealing  with  political activity]  from                                                               
Section 1.                                                                                                                      
                                                                                                                                
Number 0481                                                                                                                     
                                                                                                                                
MR. YOULD said  it is of greater concern to  the industry that HB
169 is precluding expansion activities.   He stated that doing so                                                               
would hurt cooperatives throughout  the state, cooperatives which                                                               
have provided  good service that  was not brought by  the private                                                               
sector.    He quoted  from  the  bill's definition  of  expansion                                                               
activities, "an  activity that is  intended to  attract customers                                                               
to an electric cooperative who, at  the time of the activity, are                                                               
customers of  another electric utility."   He said this  is aimed                                                               
strictly  at cooperatives,  not  at  municipal or  investor-owned                                                               
utilities.   ARECA has unanimously adopted  a resolution opposing                                                               
HB 169.  The group thinks that  if Alaska is going into some form                                                               
of  competition in  the future,  "it should  not be  done with  a                                                               
cocked hat."                                                                                                                    
                                                                                                                                
MR. YOULD  explained that  cooperatives are  allowed to  get into                                                               
other business  ventures of like value  or of like nature  to the                                                               
electric utility  industry.  For example,  ARECA's largest member                                                               
utility is  in the Internet  business.  Some members  are looking                                                               
into  entering  the satellite  television  business  to bring  in                                                               
satellite television  with small dishes that  otherwise could not                                                               
come to the state.  Still  others are considering going into home                                                               
security systems or two-way radio  communication systems.  All of                                                               
these  activities  involve  one utility  venturing  into  another                                                               
utility's service  area and seeking  members.  The  definition he                                                               
had quoted appears to restrict  those activities.  "I think there                                                               
needs  to  be   a  very  strong  rewriting   of  this  particular                                                               
definition if  this particular bill  is to go forward,"  he said,                                                               
[assuming that] the  intent is to restrict one  co-op from taking                                                               
over another co-op, which he thinks was the original intent.                                                                    
                                                                                                                                
Number 0686                                                                                                                     
                                                                                                                                
MR. YOULD  said he has major  questions about how the  bill would                                                               
work.   Ostensibly, a cooperative  gets a vote of  its membership                                                               
concerning which of them are willing  to allow a portion of their                                                               
rates  to go  toward advertising  and expansion  activities.   He                                                               
wondered  what happens  if one  utility  surreptitiously gets  75                                                               
percent of its  voters to agree to taking over  a second utility,                                                               
thereby acquiring  "a pretty large  war chest."  When  the second                                                               
utility realizes what is happening,  suppose that it goes out and                                                               
tries to  get a  vote of  its people  but only  comes up  with 15                                                               
percent to ward off the first  utility.  The result is an unequal                                                               
attempt to  consolidate.  That  is not to say  that consolidation                                                               
is wrong, but the playing field is not equal.                                                                                   
                                                                                                                                
MR. YOULD strongly recommended that  HB 169 be examined much more                                                               
closely.  He suggested that  before the committee takes action on                                                               
this bill,  it consider  where it fits  in with  electric utility                                                               
restructuring,  the very  issue  that this  committee is  charged                                                               
with addressing.                                                                                                                
                                                                                                                                
Number 0799                                                                                                                     
                                                                                                                                
REPRESENTATIVE GREEN  asked Mr.  Yould whether  he read  that "as                                                               
prohibiting or just conditionally?"                                                                                             
                                                                                                                                
MR. YOULD said  he reads it as conditionally;  however, he thinks                                                               
there is  an effective barring.   "It is  so difficult to  go out                                                               
and get the  members to vote to allow an  expansion activity that                                                               
you have effectively  precluded the utility from  doing that," he                                                               
said.   He asked how  legislators would  feel if every  time they                                                               
wanted to  make an appropriation  to any state program,  they had                                                               
to get a  vote of the people  to do so, and even  then could only                                                               
do it on a pro-rata basis according to how that vote came out.                                                                  
                                                                                                                                
REPRESENTATIVE GREEN  said that was exactly  what the legislature                                                               
did last  September [putting  before the  public the  question of                                                               
tapping the  Permanent Fund  to help  pay for  state government].                                                               
An  issue as  large  as taking  over another  utility  is not  an                                                               
everyday  activity.   Only on  major  issues would  a utility  be                                                               
required to  secure the  informed consent of  the people  who own                                                               
the utility.                                                                                                                    
                                                                                                                                
MR. YOULD said  he understood that to be the  intent, but he does                                                               
not think the  wording of the bill is restrictive  enough to that                                                               
intent.                                                                                                                         
                                                                                                                                
Number 0909                                                                                                                     
                                                                                                                                
CHAIRMAN HUDSON asked Mr. Yould to  specify the areas of the bill                                                               
that he thinks need rewording.                                                                                                  
                                                                                                                                
MR. YOULD  cited the definition  of expansion activities  on page                                                               
2, line 23, saying it is  "extremely broad" and seems to preclude                                                               
any  type of  business expansion  activity that  would attract  a                                                               
customer from  another utility.   He then  cited page 2,  line 7,                                                               
subsection  (I),   saying  the  whole  discussion   on  political                                                               
activities   and  contributions   to   political  activities   is                                                               
redundant, already being covered by both APOC and RCA.                                                                          
                                                                                                                                
Number 1000                                                                                                                     
                                                                                                                                
REPRESENTATIVE PORTER  asked whether political  contributions now                                                               
are precluded by statute.                                                                                                       
                                                                                                                                
MR. YOULD  affirmed that.   In response  to a  follow-up question                                                               
from Representative  Porter, Mr. Yould  said he did not  think HB
163 would allow them under certain circumstances.                                                                               
                                                                                                                                
Number 1075                                                                                                                     
                                                                                                                                
CHAIRMAN HUDSON noted  that the committee is  a policy committee,                                                               
and its  purpose in looking over  HB 169 is to  determine whether                                                               
the concept is right.                                                                                                           
                                                                                                                                
REPRESENTATIVE  GREEN  noted that  the  large  costs incurred  in                                                               
"this recent tiff  between the two co-ops," have to  be paid from                                                               
somewhere.  Although those costs  technically may not be in their                                                               
rate base, the ratepayers ultimately end  up paying for it.  They                                                               
should  have  the  right  to  say, "This  is  not  in  your  core                                                               
function" [or to endorse a management proposal to expand]                                                                       
                                                                                                                                
REPRESENTATIVE PORTER said he is  still concerned about HB 169 in                                                               
relation to political  activity.  If the  law currently precludes                                                               
political activity, the  way he reads page 2, line  11, it allows                                                               
political activity  under certain circumstances.   He read:   "An                                                               
electric  cooperative may  only  include a  charge for  political                                                               
activity  in   a  rate   if  the   cooperative  ...   [meets  the                                                               
qualifications thereafter  specified]."  He said  he is concerned                                                               
that this  portion of HB 169  provides a method for  getting into                                                               
political activity, and  he does not think that is  the intent of                                                               
this legislation.                                                                                                               
                                                                                                                                
Number 1288                                                                                                                     
                                                                                                                                
JEFF  LOGAN,   Staff  to   Representative  Green,   Alaska  State                                                               
Legislature, clarified that  the language in HB  169 only relates                                                               
to  the  rate  monies.    It  does  not  preclude  any  political                                                               
activities  from  the  margin  monies.    That  is  an  important                                                               
distinction.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GREEN asked  whether the  committee members  were                                                               
familiar with margins and base rates.                                                                                           
                                                                                                                                
MR.  LOGAN  explained  that the  utility  commission  allows  the                                                               
cooperatives to extract a cost  from their members above the cost                                                               
of providing  the electrical  service, "a  profit, if  you will."                                                               
But  because  a  cooperative is  a  not-for-profit  organization,                                                               
those  monies  are called  margins.    They  go into  a  separate                                                               
account.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GREEN added that those  monies are to be repaid to                                                               
the  members if  there  is  not some  other  base-core need  that                                                               
arises unexpectedly.   He explained that a utility  needs to have                                                               
some  funds available  to meet  costs  beyond the  budget.   When                                                               
those "rainy day" funds are  sufficient, they are returned to the                                                               
members.                                                                                                                        
                                                                                                                                
Number 1383                                                                                                                     
                                                                                                                                
REPRESENTATIVE  BERKOWITZ  noted  that   HB  169  appears  to  be                                                               
somewhat  contentious.   He wondered  if  the bill  could be  set                                                               
aside to proceed with the  scheduled joint meeting with the House                                                               
Community and  Regional Affairs Standing  Committee.  He  said he                                                               
was  concerned that  there could  be  protracted discussion,  and                                                               
that there may be serious problems with the bill.                                                                               
                                                                                                                                
[Several other committee members voiced concurrence.]                                                                           
                                                                                                                                
REPRESENTATIVE GREEN said it sounded  as if half of the committee                                                               
thought there should be more discussion  on HB 169.  He suggested                                                               
it would a good idea to hold it over.                                                                                           
                                                                                                                                
CHAIRMAN  HUDSON moved  HB 169  to  the bottom  of the  calendar,                                                               
saying that  it could be  discussed if there was  sufficient time                                                               
after  the joint  committee meeting  on power  cost equalization.                                                               
[The  remaining time  proved to  be insufficient,  so HB  169 was                                                               
held over.]                                                                                                                     
                                                                                                                                
[Note:  At 8:40 a.m.,  Chairman Hudson announced the beginning of                                                               
the joint  meeting with  the House  Community &  Regional Affairs                                                               
Standing  Committee  and passed  the  gavel  to that  committee's                                                               
chair, Chairman Morgan.   A separate set of  minutes is available                                                               
for that meeting.]                                                                                                              
                                                                                                                                

Document Name Date/Time Subjects