Legislature(1999 - 2000)
04/21/1999 08:07 AM House URS
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON UTILITY RESTRUCTURING
April 21, 1999
8:07 a.m.
MEMBERS PRESENT
Representative Bill Hudson, Chairman
Representative John Cowdery, Vice Chairman
Representative Pete Kott
Representative Norman Rokeberg
Representative Brian Porter
Representative John Davies
Representative Ethan Berkowitz
MEMBERS ABSENT
Representative Joe Green (alternate)
COMMITTEE CALENDAR
* HOUSE BILL NO. 81
"An Act relating to the provision of electric service in the state;
and providing for an effective date."
- HEARD AND HELD
* HOUSE BILL NO. 185
"An Act exempting certain small water utilities from regulation by
the Alaska Public Utilities Commission."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 81
SHORT TITLE: ELECTRIC CONSUMER'S BILL OF RIGHTS
SPONSOR(S): REPRESENTATIVES(S) ROKEBERG, Dyson
Jrn-Date Jrn-Page Action
2/05/99 144 (H) READ THE FIRST TIME - REFERRAL(S)
2/05/99 144 (H) URS, L&C
2/16/99 228 (H) COSPONSOR(S): DYSON
4/21/99 (H) URS AT 8:00 AM CAPITOL 120
BILL: HB 185
SHORT TITLE: SMALL WATER UTILITIES EXEMPT FROM APUC
SPONSOR(S): REPRESENTATIVES(S) OGAN
Jrn-Date Jrn-Page Action
4/09/99 702 (H) READ THE FIRST TIME - REFERRAL(S)
4/09/99 703 (H) URS, L&C
4/21/99 (H) URS AT 8:00 AM CAPITOL 120
WITNESS REGISTER
JANET SEITZ, Legislative Assistant
for Representative Rokeberg
Alaska State Legislature
Capitol Building, Room 24
Juneau, Alaska 99801
Telephone: (907) 465-4968
POSITION STATEMENT: Answered questions with regards to HB 81.
STEVE CONN
Alaska Public Interest Research Group (AKPIRG)
603 West 18th Avenue
Anchorage, Alaska 99503
Telephone: (907) 278-3660
POSITION STATEMENT: Testified on HB 81.
ROBERT WILKINSON, Chief Executive Director
Copper Valley Electric Association (CVEA)
P.O. Box 45
Glennallen, Alaska 99588
Telephone: (907) 822-8340
POSITION STATEMENT: Testified on HB 81.
DENNIS LEWIS, Electric Superintendent
City of Petersburg; Chairman, Four Dam Pool
P.O. Box 329
Petersburg, Alaska 99833
Telephone: (907) 772-4203
POSITION STATEMENT: Testified on HB 81.
DAVE CARLSON, Board member
Four Dam Pool
P.O. Box 1232
Petersburg, Alaska 99833
Telephone: (907) 772-3765
POSITION STATEMENT: Testified on HB 81.
NELSON ELLIOT, Director
Crimsonview Owners Association
11600 Crimsonview Drive
Palmer, Alaska 99645
Telephone: (907) 746-0775
POSITION STATEMENT: Testified on HB 185.
REBECCA PAULI, Attorney
Birch, Horton, Bittner and Cherot
1127 West 7th Avenue
Anchorage, Alaska 99501
Telephone: (907) 276-1550
POSITION STATEMENT: Testified on HB 185.
ACTION NARRATIVE
TAPE 99-18, SIDE A
Number 0001
CHAIRMAN BILL HUDSON called the House Special Committee on Utility
Restructuring meeting to order at 8:07 a.m. Members present at the
call to order were Representatives Hudson, Cowdery, Kott, Rokeberg,
Porter and Davies. Representative Berkowitz arrived at 8:08 a.m.
Representative Green (alternate) was not present.
HB 81 - ELECTRIC CONSUMER'S BILL OF RIGHTS
CHAIRMAN HUDSON announced that the first order of business was
House Bill No. 81, "An Act relating to the provision of electric
service in the state; and providing for an effective date."
Number 0153
REPRESENTATIVE NORMAN ROKEBERG, Sponsor, Alaska State Legislature,
noted that Janet Seitz, his Legislative Assistant, was present to
answer any questions. He stated:
House Bill 81 is the result of the testimony and information
that was provided to the legislature in the form of the Joint
Committee on Electric Utility Restructuring, which is a ...
committee which I co-chaired with Senator Sharp this last
year. In our studies of the electrical restructuring issue it
became apparent to me, Mr. Chairman, that because we are
fundamentally a publicly power-owned state the first building
block that we should take up in consideration of any
electrical restructuring is the consumer protection issues and
giving guidance to the APUC [Alaska Public Utilities
Commission] as to what the legislature believes to be the most
important issues before we, if you will, dive off the cliff
into any area of semi-deregulation or restructuring.
With that, Mr. Chairman, we have drafted this legislation,
which is intended to be triggered, if in fact the APUC and/or
the legislature adopts any form of electrical restructuring or
retail wheeling, whatever you wish to describe it. Mr.
Chairman, I have passed out the committee a letter that was
addressed to myself and Representative Sanders, as the
chairman of the subcommittee in the Labor and Commerce
Committee last year or in 1997, which is an opinion of the
Department of Law, indicating that under existing statute the
APUC has the ability without legislative direction to take up
and grant competition.
Mr. Chairman, I would point out that over the course of
testimony to the interim committee this was a major ... topic
of conversation, but I would report to you that I think
there's general consensus throughout the states in utilities
that the APUC does retain this power. At one point a couple
years ago there was some controversy about whether or not it
exists, but I think everybody recognizes now or agrees with
this legal opinion that the APUC does have the power and with
that, Mr. Chairman, because there is a docket before the APUC
by Aurora Power to be an aggregator or resaler of power, I
think this bill is appropriate currently, and therefore, it
has some sense of urgency and a sense that even if the
legislature does not act on the report by CH2M Hill that the
docket before the APUC allows them and almost asks them to
take up the whole issue of restructuring and particularly that
of the resaler or the aggregator. Mr. Chairman it's my
opinion that the provisions for these regulations and consumer
protections should be in place before that docket is ruled on
finally to protect -- in the public interest.
This proposal is not unique among the states, Mr. Chairman.
You'll find in your packet just some examples of legislation
and reports from various other jurisdictions; including
Arizona, California, Maine [and] Delaware that have adopted an
electric ... consumer bill of rights, so I can't take credit
for being the originator of this idea, but it's positive
legislative plagiarism, if you will, that we address these
particular issues.
Among the issues ["rights"] that are covered here, Mr.
Chairman, are the Right to Know, the Right to Choose and the
Right to Fair Dealing, the Right to Redress, the Right to
Privacy, the Right to Service Quality and Required Code of
Conduct and Oversight.
The bill further mandates regulations to require that
electrical service providers must continue to provide service
to residential consumers who demonstrate that economic
hardship has prevented payment of a bill in full. So, this
speaks to the issue of not only the provider of last resort,
but also speaks to the issue of inability to pay, and those
particular consumer issues.
The bill is intentionally simple, in the sense, to give
maximum flexibility to the APUC in drafting the regulations,
but on the other hand it points out and it stipulates those
areas that should be covered by the commission.
We also have distributed to you an e-mail that we received,
just yesterday, from Karl Rabago of CH2M Hill, who was kind
enough to look at the legislation and makes a critique of a
legislation and has several points and recommendations to the
committee regarding adjustments to the bill. We haven't had
time to digest that and put it in any amendment form, Mr.
Chairman, but I would commend that to the committee.
Also, we do have a letter of opposition from Copper Valley
Electrical Association, and it points out something very
interesting that everybody should be aware of; that in the
existing statutory scheme in Alaska publicly owned utilities
may opt out by election. Copper Valley has opted out of
regulation by the APUC from economic regulation; however, this
bill before you does provide that it can't be opted out from
and that's an important fact and I wanted to bring that to the
committee's attention, because a consumer bill of rights and
protection of the consumer interest is important whether you
regulate it or not. So, I think it should have a universal
application to all consumers in the state of Alaska. ...
There's the concerns and I appreciate Mr. Wilkinson's concern;
hopefully he'll be on teleconference this morning and be able
to testify. We also have testimony hopefully from Ms. Pease
from Aurora Powers speaking on some of the issues that are
important. Mr. Chairman, I think there is a certain sense of
urgency on this legislation. I think it needs to tuned up a
little bit, but I commend this to the committee and look
forward to working on this and reporting this bill out. Thank
you Mr. Chairman.
Number 0680
REPRESENTATIVE BERKOWITZ wondered what legislation, from another
state, was used as a pattern for Representative Rokeberg's
legislation.
REPRESENTATIVE ROKEBERG deferred the question to Ms. Seitz.
JANET SEITZ, Legislative Assistant for Representative Rokeberg,
Alaska State Legislature, replied that HB 81 was basically
patterned after Michigan.
REPRESENTATIVE BERKOWITZ indicated that if the adjective
"competitive" was eliminated throughout the legislation, the
consumer protection would apply to all consumers in the state and
it would avoid the problem of having providers claim that they
weren't in a competitive market, and therefore, they didn't have to
comply.
Number 0740
REPRESENTATIVE ROKEBERG pointed out that the intention of the bill
is to have the protections in place only for those areas and those
jurisdictions that have competition. Under current regulatory
authority a lot of the issues should to be spoken to, even though
there is a certain universality. The concern is what type of
statutory and regulatory regime would a competitor of including a
pilot program be operating under. The intent of this legislation
is to draw to the commission's attention what the legislature
believes the public policy of the state should be in the
competitive environment, but not necessarily a fully regulated
environment.
REPRESENTATIVE BERKOWITZ explained that it would leave consumers in
a non-competitive environment with different rights than is seen in
a competitive environment.
REPRESENTATIVE ROKEBERG said that he believes Representative
Berkowitz's statement is probably accurate. The question is
whether or not the consumers in a non-competitive environment are
properly protected by the existing regulatory scheme. He added
that it is not the intention of HB 81 to rewrite the entire
regulatory scheme that already exists, but to rewrite it in that
area, if selected, to adopt competitive market place conditions for
electric service providers. The bill speaks to instances of single
billing provisions, which really only apply to competition and
those type of circumstances.
REPRESENTATIVE BERKOWITZ stated that if that is really the intent
of the bill then it seems that something could be done to tighten
up the title.
Number 0888
REPRESENTATIVE COWDERY said, "You said that the smaller utilities
-- this doesn't affect the small ones; the unregulated utilities.
Just regulated or unregulated. He asked, "Does it affect both or
the smaller utilities it's your attention not to affect?"
REPRESENTATIVE ROKEBERG clarified that it is not a matter of size,
but whether or not it is a competitive environment. Currently, all
utilities in the state that have not opted out are regulated by the
APUC. Even the opted out utilities are regulated in terms of their
service area. The distinction is the whole issue of restructuring
the competitive market place. The point of HB 81 is contingent on
the creation of any kind of competitive environment. He noted that
one of Mr. Rabago's recommendations is to make sure that the bill
is clear that it would affect the buy-out program.
REPRESENTATIVE COWDERY wondered if Chugach Electric Association
(CEA) and Matanuska Electric Association (MEA) have had an opinion
on HB 81.
REPRESENTATIVE ROKEBERG indicated that he is not sure if any formal
testimony was received on the bill, but they have been in
discussions with them for several years.
CHAIRMAN HUDSON noted that Robert Wilkinson from Copper Valley
Electric Association (CVEA) will be testifying on the bill as well
as Steve Conn from the Alaska Public Interest Research Group
(AKPIRG).
Number 1037
REPRESENTATIVE PORTER referred to Representative Rokeberg's
testimony, specifically the part on right to privacy and wondered
where privacy was stated in the bill.
REPRESENTATIVE ROKEBERG referred to page 2, subsection (4) on line
15 of HB 81, where it reads, "maintain information and records,
including records concerning individual electric use patterns,
about the electric service provider's consumers as confidential
records." There is additionally some comments by Mr. Rabago on the
treatment of those records. The intent there is so a competitor
doesn't become privy to that, although there are provisions and
recommendations that the records be available without the names
attached to them so they are a part of a statistical pool.
CHAIRMAN HUDSON indicated that he was looking in HB 81 for a
reliability requirement.
Number 1144
REPRESENTATIVE ROKEBERG referred to page 2, line 31, subsection (d)
of HB 81, where it reads, "The commission shall adopt regulations
to require a supplier or an aggregator operating in a competitive
electric service market to meet minimum standards for certification
as a condition of market entry."
CHAIRMAN HUDSON asked if the idea is that reliability will fit
within the minimum standards.
REPRESENTATIVE ROKEBERG replied that is the intention. He pointed
out that reliability was probably the number one issue of the
testimony given at the interim committee.
Number 1190
REPRESENTATIVE DAVIES indicated that there may be some question
about defining when a competitive electric service market has been
entered into. In the report from CH2M Hill there are a variety of
pathways that are discussed; one, jumping in with both feet and
two, systematically getting there. The question in his mind is if
they might want to consider a more measured approach to getting
into retail competition. He wondered at what point are they truly
in a competitive retail market and if that might be something the
APUC decides. Clearly whenever there is some consumer choice this
would have to come into effect.
REPRESENTATIVE ROKEBERG referred to paragraph 2 on page 1 of Mr.
Rabago's e-mail, where it states, "A competitive electric service
market means a market or program in which retail electricity
customers are provided a choice of electricity provider, whether on
a permanent, limited, or pilot basis." He said that he would be
recommending that as an amendment to HB 81 in order to make sure
that it's clarified.
REPRESENTATIVE DAVIES asked Representative Hudson what his intent
is on moving the bill.
CHAIRMAN HUDSON replied that the committee will work through
testimony and then decide. He agreed with Representative Rokeberg
that an amendment should be made to include Mr. Rabago's
definition.
REPRESENTATIVE ROKEBERG stated that he appreciates Mr. Rabago's
input, which is not only complimentary to the legislation, but
also makes some extremely important recommendations.
Number 1354
CHAIRMAN HUDSON stated, "One of the questions I have,
Representative Rokeberg, is we're putting in a new provision in
there to essentially tell the commission to establish by regulation
all of these consumer protective elements in here. To your
knowledge, particularly since you dealt with this throughout the
interim last year, how many of these are they currently dealing
with? Do they have anything like this already on the books that
we're trying to expand or to fulfill, or do they not?"
REPRESENTATIVE ROKEBERG replied, "They do have provisions on the
economic hardship issue, but in terms of many of the other issues,
I'm basically guessing that they don't, because a lot of these are
based on the necessity to have regulation in the competitive
environment not in a non-competitive environment." He pointed out
that a substantial fiscal note may accompany HB 81. There have
been some conversations with the APUC. He said that in a certain
sense it doesn't surprise him, and in another sense he finds it
disappointing, but anytime legislation is being drafted of this
scope, meaning that HB 81 is an essential portion of any
restructuring regime, there is going to be some cost. It is up to
the legislature to decide if they want to absorb any of those costs
and how that is going to be done with relation to HB 81.
CHAIRMAN HUDSON requested clarification on whether or not there was
any fiscal note.
REPRESENTATIVE ROKEBERG clarified that they haven't received one
yet.
STEVE CONN, Alaska Public Interest Research Group (AKPIRG),
testified via teleconference from Anchorage. He stated that from
day one, as we enter the brave new world of electric restructuring
deregulation, Representative Rokeberg has sought to learn and
define the consumers interests. He pointed out that HB 81 is
seeking to address the brave new world in which consumers will now
be confronting competition. In California there were people who
held themselves out as capable of providing service and were
actively soliciting consumers when they in fact could not provide
service; therefore, pre-certification requirements are absolutely
essential. A problem that is less apparent in the bill is the
"slamming" phenomenon that happens in telecommunications, whereby
someone calls and before the consumer knows it they've been
switched. The Federal Communications Commission (FCC) has
developed regulations for allowing a consumer, who discovers that
they are working with a "Brand X" provider, to opt out of that
within a certain period of time. This new environment does require
funding. Historically, the biggest problem in Alaska has not been
the absence of legislation to protect consumers, but the
wherewithal to enforce and implement that legislation. He said
that he hopes a fiscal not emerges which is satisfactory to the
legislature and accompanies the bill throughout.
Number 1623
MR. CONN continued. He pointed out that another issue the bill is
seeking to address is the issue of "cherry-picking." There are
customers who are desirable and there are customers that are less
desirable. He expressed concern with the language on page 2, lines
10 through 14, which reads, "offer electric service to any consumer
in the area served by the electric service provider so long as
providing the service is technically feasible at a reasonable cost
to the provider; provide electric service choices and pricing
options to all consumers without discrimination." He wondered who
is alternately going to determine the technical feasibility and the
reasonable cost. He also recommended that the language read,
"provide the same electric service choices," instead of, "without
discrimination."
MR. CONN concluded by stating that HB 81 demands that APUC or some
regulatory mechanism have exclusive and broad power to deal with
consumer complaints. He believes that HB 81 is a good first step,
but he hopes that the committee will take his recommendations under
advisement and fine tune the bill.
Number 1743
REPRESENTATIVE BERKOWITZ stated that it seems the consumers are
best served if the adjective "competitive" is taken out of the
bill. If it is going to work for consumers in a competitive
environment, it should work for all consumers.
MR. CONN responded that it is quite obvious that HB 81 would not
have emerged without the competitive reality that is moving across
the state. There are a lot of electric cooperatives, particularly
the smaller ones, that do a good job of serving their consumers and
there is a more immediate relationship between the operators and
the consumers. He said that his own sense of what the word
"competitive" means is that it reflects a movement throughout the
entire state and is not reflective of subregions. He views the
bill as one that reflects that the entirety of the state,
particularly as it relates to suppliers and aggregators.
Number 1813
CHAIRMAN HUDSON referred to Mr. Rabago's suggestion that the
legislature implement a definition of a competitive electric
service market. That way if the term "competitive" was left in the
bill with a definition, it would fit better.
REPRESENTATIVE BERKOWITZ pointed out that anytime there is a
definition, it is a loophole for somebody.
REPRESENTATIVE COWDERY noted that competition is suppose to be the
best means of consumer protection. The utilities are deregulated
to allow for competition.
MR. CONN explained that there is no question that competition is
good for the consumer, but the problem that is found with the new
realms, telecommunication and electric or other, is that those who
speak with one tongue, competition, often seek to discriminate as
they actually move into a realm and implement their endeavors. For
example, "cherry-picking" is a phenomenon; the new competitor
doesn't really want to compete for all the business, they just want
to compete for the very best business. A bill like HB 81 serves a
useful purpose, because it sustains, maintains and underscores
competition.
REPRESENTATIVE COWDERY stated that if this regulation is needed
when competition occurs, then it must really be needed without
competition.
Number 1941
ROBERT WILKINSON, Chief Executive Director, Copper Valley Electric
Association (CVEA), testified via teleconference from Glennallen.
He expressed his appreciation to Representative Rokeberg and the
spirit of legislation regarding HB 81. He indicated that he had a
few concerns with the bill; one, that the CH2M Hill report is in
draft form. In his opinion the state falls short of properly
addressing rural issues. Another policy issue that has not been
addressed or finalized is how will public power, in general, be
treated. As heard from the consultants this is a public power
state with somewhere around 90 percent of the costumers being
served by public power utilities. With those issues open, he
believes that adopting a bill of rights that would effect every
regulated electric utility in the state would be premature, given
that it is not certain if competition will be coming to certain
parts of Alaska.
Number 2061
MR. WILKINSON continued. Two, the applicability of Article 3 of AS
42.05, which has a provision where cooperative utilities may opt
out from under economic regulation by the APUC. CVEA exercised
that right last year and of the 36 percent of CVEA members who were
asked, "Should CVEA be exempt from regulation by the APUC?", 67
percent said yes. A major concern during the time when the CVEA
was campaigning for deregulation was the fair and
non-discriminatory treatment of the customers by the utility. As
part of the campaign CVEA adopted their APUC approved Tariff as the
rules and regulations they would follow under local regulation.
They are planning on making some modest changes to the Tariff to
make it a little more user-friendly to the customer. There was a
concern identified by the members that if the CVEA took the APUC
out then there would not be an appellate body to go to in the event
they had a dispute with the utility. The CVEA adopted a very
expanded complaint procedure, and created what they call a Board of
Adjustment, which is composed of members of the association. The
Board of Adjustment serves as an appellate body for going through
a dispute resolution. Specifically, if the members are not
satisfied with how the utility decides on a certain issue then they
appeal to the Board of Adjustment and then the Board of Adjustment
may appeal to the full Board of Directors if the customer is still
unsatisfied. The CVEA also adopted principles that say that their
services and policies will be fair and non-discriminatory. This
again was a very important issue to the membership.
MR. WILKINSON concluded by saying that he feels it is premature to
move HB 81, given where the CH2M Hill study is on rural Alaska and
public power. He believes that CVEA's local elected Board of
Directors can do the job of providing electrical service much
better than the APUC, and that is a major reason they opted out of
APUC regulation. Doing business in a rapidly changing environment
when there is the bureaucracy of the APUC is very difficult. CVEA
has two open dockets at the APUC still dealing with competitive
issues. He said that if CVEA is going to survive a new competitive
environment, they cannot afford APUC regulation and they feel they
can do better on their own.
Number 2246
REPRESENTATIVE PORTER asked Mr. Wilkinson what kind of competitive
arena he was in presently that would entail a "cherry-picking"
case.
MR. WILKINSON replied that there was a company called Alaska Power
Systems that was attempting to install generators adjacent to two
of CVEA's customers and it was a direct competitive threat. If
these customers had went off the system it would have been a good
example of the stranded investment issue. CVEA would have lost
energy sales, and given the cost to operate this utility CVEA would
have experienced adverse rate impacts on their customers. The
company, Alaska Power Systems, is now out of business and the
situation has more or less gone away. There was also a situation
where a company contracted with CVEA's largest industrial customer,
Petro Star Valdez Refinery, and it looked as if they were going to
install their generating equipment and the Petro Star Valdez
Refinery was going to leave CVEA. The members, in that situation,
would be facing a rate increase of over 13 percent, which means
"cherry-picking" in rural Alaska is very real and CVEA has seen it
first hand. He pointed out that the "cherry picking" issue would
still remain under the purview of the APUC, because "cherry
picking" is a service territory issue, which the APUC continues to
regulate. He added that if a company came in attemping to take
some of CVEA's large customers, they would file a complaint with
the APUC.
Number 2356
REPRESENTATIVE ROKEBERG said that he appreciates Mr. Wilkinson's
comments on HB 81. He requested clarification on whether or not
Mr. Wilkinson's concern is more a concern with regards to the
APUC's ability or inability to follow through and implement HB 81
or if it is about the area of competition.
MR. WILKINSON expressed concern with regards to competition coming
to rural Alaska prior to adopting legislation, because it would
give the APUC broad power and that is a concern. Also, he believes
that the study does not properly address what competition will look
like in rural Alaska.
Number 2400
REPRESENTATIVE ROKEBERG pointed out that Representative Berkowitz
has asked some questions along the lines of why the provisions of
HB 81 would not be applicable in a non-competitive environment. He
asked Mr. Wilkinson if he would shed some light on whether or not
he feels it is applicable to his circumstance currently.
MR. WILKINSON stated that HB 81 is very much applicable to every
utility that requires a certificate. He pointed out that it might
be appropriate to include a definition as to where competitive
markets are going to exist, and certainly if HB 81 was modified to
say that the competitive markets include the interconnected
Railbelt system or the Anchorage area, whatever the committee
chooses, HB 81 would make a lot more sense.
REPRESENTATIVE ROKEBERG restated his question. He asked if HB 81
was applied to Mr. Wilkinson's service area, currently, not
withstanding whether there was competition or not, does he think it
would be beneficial or harmful.
TAPE 99-17, SIDE B
Number 2461
MR. WILKINSON stated, "... our Board of Directors, which are
elected by our 3,300 customers are the best equipped to determine
what is best for this region of the state, not the Alaska Public
Utilities Commission."
CHAIRMAN HUDSON explained that the committee is looking for what
the constructive elements in HB 81 are and where they should apply
and where they should not apply.
MR. WILKINSON responded that he would be happy to provide
additional comments on the individual sections of the legislation.
Number 2365
DENNIS LEWIS, Electric Superintendent, City of Petersburg;
Chairman, Four Dam Pool, testified via teleconference from
Petersburg. He stated that HB 81 is premature; they need to wait
and see what competition brings before they create solutions for
it. The communities, at least Petersburg, opted out by election in
the middle 1970s from the APUC. The APUC only governs two things
in the electric utility in Petersburg; one, the certificate of
convenience, which is a service area, and two, if there is a
dispute on joint goal agreements. As far as rate goes, with
regards to competition, Petersburg is an isolated community and the
Mayor and City Council decide the regulations. He cannot see a
small community, such as Petersburg, being governed by the APUC.
Number 2294
DAVE CARLSON, Board member, Four Dam Pool, testified via
teleconference from Petersburg. He noted that he is also a former
Mayor and City Council member. He stated that municipalities such
as Petersburg presently have the governing powers to deal with the
issues at hand. A lot of the issues addressed in HB 81 have come
up on a local level and they've dealt with them there. He
expressed concern with APUC becoming more involved in the
regulation of the utility, because he feels it will raise the level
of regulation to a degree of almost redundancy. He pointed out
that issues and consumer complaints are handles effectively at the
local level and energy is delivered to the consumer at a
competitive rate; if he truly thought that the APUC could do a
better job then they do locally then he would be forced to believe
that the federal government could do a better job regulating fish
and game.
Number 2228
REPRESENTATIVE ROKEBERG informed Mr. Carlson that HB 81 does not
apply to any area that is not under a competitive market situation.
He asked Mr. Carlson if he thought that Petersburg would or should
be classified as a competitive retail marketplace.
MR. CARLSON responded that he didn't understand Representative
Rokeberg's question.
REPRESENTATIVE ROKEBERG said that he wasn't sure if Mr. Carlson
understood the bill, because it only applies to those areas that
are in a competitive market circumstance.
MR. CARLSON stated that there is not currently any competition in
Petersburg, although they still have the same concerns with "cherry
picking." If HB 81 is specifically limited to the Railbelt area,
then that is another issue, and if Petersburg is truly exempt then
he indicated that his comments probably weren't worth much.
Number 2156
REPRESENTATIVE COWDERY pointed out that there is competition in the
telephone industry. He asked Representative Rokeberg if he thought
HB 81 should apply to the telephone industry as well.
REPRESENTATIVE ROKEBERG noted that there is not local competition,
except in the Anchorage area, and there are certain areas that
might be applicable, but he hasn't looked at them yet.
CHAIRMAN HUDSON added that there is not only telephone, but also
cable.
REPRESENTATIVE ROKEBERG explained that these are all consumer
protection issues that are suppose to be covered by the regulatory
authority, which is the APUC. It is the level and in what context
they choose to approach them, and HB 81 speaks to the context of
retail electrical service.
BOB LOHR, Executive Director, APUC, testified via teleconference
from Anchorage. He stated that his staff has prepared a fiscal
note for HB 81. They gave it to the APUC to review. The staff
estimate is $207.7 thousand fiscal year 2000 and the same level
through the year 2003 and then dropping off to zero thereafter. As
Representative Rokeberg indicated this is not a cheap or free
exercise in terms of the steps involved; number one, the
development of very detailed regulations and the crafting of those
and, number two, the ongoing response to complaints under the
regulations adopted on the local telephone side. The volume of
complaints has substantially increased as a result of local
competition. Customers have a choice, but in terms of exercising
that choice the customers need to have the rights that are provided
in this bill, clearly specified, as well as consumer education
about what is involved in making a choice of a service provider.
In the past it has been a monopoly service and the commission has
very carefully regulated the entry into that monopoly market.
REPRESENTATIVE PORTER stated that from the testimony received,
specifically CVEA's testimony, he is wondering if HB 81, when in
place, would kick in when somebody decided to come into a small
community and sell a generator. He said if that was the case it
would be problematic.
CHAIRMAN HUDSON pointed out that they have the option of opting
out, so if they opt out then would it or would it not apply.
Number 1906
REPRESENTATIVE DAVIES agreed that it is important to define when HB
81 goes into effect. He stated that he would hope that the issue
that Representative Porter is referring to would be dealt with
under the territorial regulatory powers of APUC and not under HB
81. He noted that he can see where the ambiguity is coming from
and thinks that the ambiguity needs to be removed.
REPRESENTATIVE ROKEBERG stated that he appreciates Representative
Porter's concern and he is not sure whether or not it is handled
under the territorial issue. He clarified that the point is that
the local utilities can opt out but they can't opt out under
territoriality and the provisions in HB 81 would apply to them if
there was a competitive situation. If the APUC allows competition
they have to look at these issues. He concluded by saying that
some of the testimony exhibits the fear and loathing of electrical
restructuring and the lack of confidence in the APUC and the
concerns about what electric restructuring will do in rural areas.
He thinks that it is ironic, because HB 81 is trying to answer
those questions, not inflame them, and those people would not be
affected unless they were in that situation and then HB 81 would
kick in and help.
Number 1791
CHAIRMAN HUDSON announced that HB 81 would be held over to the next
meeting.
HB 185 - SMALL WATER UTILITIES EXEMPT FROM APUC
CHAIRMAN HUDSON announced that the next order of business was House
Bill No. 185, "An Act exempting certain small water utilities from
regulation by the Alaska Public Utilities Commission."
Number 1765
REPRESENTATIVE OGAN stated that HB 185 adds "small water utilities"
to the existing exemptions that apply to "small electric" and
"small telephone" utilities that don't gross over $50,000 annually.
He pointed out that there is a subdivision in his district where in
the first phase the homeowners association assumed ownership of the
utility and then a subsequent different developer decided to come
in and develop the second phase, which was never developed but
simply platted and the developer wanted to tag on to the water
system owned by the homeowners association. The Homeowners
Association wanted the developer to develop his own water system,
so the developer appealed to the APUC to get them to declare it a
public utility. He indicated that he has been waiting for the APUC
to rule on it, but they have not, so he introduced HB 185. He
referred to a letter from Birch, Horton, Bittner and Cherot
addressed to Representative Hudson, on the second page, where it
reads, "Water is essential to a person's survival while electricity
and telephone service are not." He stated that electricity is kind
of essential to Alaskan's survival, because their water systems
don't run without electricity and their heat doesn't run without
electricity. He referred to the next paragraph of the letter,
where it reads, "Historically, the APUC has not sought out small
water utilities such as homeowners associations for regulations.
The APUC only becomes involved in the 'regulation' of these water
utilities when asked to do so by a consumer or a lending
institution." He referred to footnote 2, where it states, "See,
e.g. Re Country Lane Estate Subdivision Property Owners
Association" and under that it reads, "ORDER declaring a small
residential subdivision's sewer operations to be a public utility,
but exempting the utility from regulation by the commission." He
said, therefore, by their own footnotes they are declared a public
utility, but they are not regulated.
Number 1553
REPRESENTATIVE BERKOWITZ explained that the synthesis in the
beginning is nothing more than an editorial comment about the
content of the order. He believes that the APUC was making a
general determination that small residential sewer operations are
public utilities subject to regulations.
REPRESENTATIVE OGAN pointed out that he thought it was kind of
curious that in the example they used they exempted them. He
stated that they would like to do the same and exempt them.
CHAIRMAN HUDSON asked how the $50,000 applies.
REPRESENTATIVE OGAN responded that he picked it because it is
already set in statute for electric and telephone utilities and
there is a precedent for it.
CHAIRMAN HUDSON indicated that it is the same figure that is used
for electric.
REPRESENTATIVE OGAN replied yes.
Number 1473
REPRESENTATIVE DAVIES stated that HB 185 seems to be an example of
a continuing class of legislation that deals with individual
circumstances; legislation by anecdote. He expressed concern with
legislating a solution to a series of individual programs. He
stated that he is assuming that the opt out provision applies to
the homeowners association as well. He believes that when a
subdivision is developed and water is provided to anyone that moves
in then there needs to be some public protection. The appropriate
place to resolve issues that arise on the subject of public service
is the APUC; that's why they were formed.
REPRESENTATIVE PORTER said that he doesn't disagree that an
individual situation was the impetus for this legislation, because
quite often individual situations bring things to light. He asked
why there is a statute that says that there is a $50,000 gross
income exemption for electrical and telephone that does not include
water.
REPRESENTATIVE COWDERY indicated that the small water utilities
have always been protected in the health and required samples. For
example in the Anchorage area in the early times when alot of
subdivisions had there own water systems they were tightly
regulated by the health issues. Also, in the Wasilla area during
the 1980s there were many areas where water was almost prohibitive
on certain lots and only a half a mile away there was an adequate
water supply. He stated that he shares the same concerns as
Representative Davies with regards to public involvement, but he
feels the main thing is the sanitation and health issues. He
stated that HB 185 is an appropriate piece of legislation and that
the APUC should not burden the public with the small water systems
and increased regulations, but the health issue needs to be
addressed.
REPRESENTATIVE OGAN explained that the Department of Environmental
Conservation (DEC) does not cover the health issues. For example,
if someone moves into a subdivision and buys a house they become a
member of the homeowners association, which means suddenly they
become a public utility.
REPRESENTATIVE BERKOWITZ pointed out that the conversation
highlights why water was not included initially. He said that he
would be curious about the legislative history on the subsection
and he would also like to know the impacts beyond this one
situation in Palmer.
REPRESENTATIVE ROKEBERG wondered how many lots are in phase one and
how many are in phase two.
Number 1167
NELSON ELLIOT, Director, Crimsonview Owners Association, testified
via teleconference from Palmer. He stated, "We would like to thank
Mr. [Representative] Ogan for introducing this legislation and the
committee for hearing us today. ... This homeowners association and
I believe most of the others, at least in this area and probably
throughout the state, were originally set up following housing
urban development model for community water systems. If these
systems require an article of incorporation and a non-profit
corporation it's going to have covenants and bylaws, and those
determine how the systems are owned and operated. The systems are
self-regulating and approval of them by HUD (Housing and Urban
Development) is required to obtain mortgages under federal
programs, ... and these are the documents under which all of us
here purchased our properties and our homes. Current APUC policy,
at least informally from what we have discovered since this
complaint was filed, is that in discussing it with APUC staff
members, five of them have indicated to us that they do not ...
regulate homeowners associations. One informed the director
(indisc. - ripping paper) APUC will not issue, because of necessity
and convenience to homeowners associations. A staff member at APUC
indicated to one of our directors, when they called to get
procedural information, they would not even believe that commission
decided to hear this complaint until the director had given them
the complaint, the file number for the case and they called it up
on the computer and found it. APUC at this point has nothing in
place to regulate homeowner associations and have no guidelines.
... They have made one filing. Their advocacy staff, in this
particular case, has made one filing, and their recommendation is
that the commission needs to convene a (indisc.) to establish
guidelines for these homeowner associations. As it stands right
now the APUC policy prevents owner-operated systems, such as this,
from complying with the statutes or (indisc.) from regulation, and
there are no guidelines for regulations to follow that would
provide us with reasonable assurance of protection from even
frivolous complaints. If APUC hold that they have the right to
regulate these homeowner associations, do they not have a statutory
responsibility to do so? What statutory authority do they have to
nullify our (indisc.) covenants and bylaws under which we purchased
our property. If they regulate us then the provisions in those
documents would be basically out the window; we'd have to rewrite
them."
Number 0950
MR. ELLIOT further stated, "Currently, APUC indicates that there
are approximately 700 class A water systems in the state of Alaska.
It would be curious to know how many of those does APUC regulate
and do they have the staff and budget resources to regulate all of
them. Again, if the systems fall under their regulatory authority,
do they not have the responsibility to establish clear room for
regulation and or attention. Our only means of revenue are through
our annual and special assessment. If APUC regulates us, this
association has no way of raising funds to meet the emergency
situation if reserve funds are insufficient to cover the cost. We
would have to file for relief through a (indisc.) and rate process
prior to being able to collect any money; financial flexibility
would be lost. ... Utilities grossing less than $50,000 annually
had to limit their subscriber base. The cost of regulation by APUC
would dramatically increase consumer costs. In our case, we would
no longer be able to manage the water systems. We would have to
contract with a management firm at a (indisc.). This coupled with
the APUC fees for regulation could easily double the cost of our
operation. This homeowners association is only two years old and
we've had very little time to continually preserve. Most of those
have currently been eroded in legal costs associated with this
complaint. The idea of regulation by complaint is a very expensive
and slow process. The issues, as far as CVOA [Crimsonview Owners
Association] and the developer, that are in this suit really are
not relevant. We feel that this legislation would present
unnecessary costs associated with regulation, leave all of the
articles, covenants and bylaws of the homeowners associations
throughout the state intact and still provide protection to the
subscribers and exempt utilities that opt for APUC regulation by
vote of members in the same hands that the Copper Valley Electric
Association opted out."
Number 0778
CHAIRMAN HUDSON pointed out that the whole discussion brings up the
interrelationship between the Alaska Department of Environmental
Conservation (ADEC) and APUC and water and sewer. He said that it
makes him wonder if they should have one or the other, but not
necessarily both. He asked Mr. Elliot if they deal with ADEC as
well.
MR. ELLIOT stated that ADEC does regulate the water systems and
they are required to do monthly testing for E. Coli bacteria, as
well as, other periodic tests. Also, any engineering on the
systems requires approval by ADEC. He indicated that there is
considerable regulation that they have to comply with and do comply
with as far as ADEC is concerned.
REPRESENTATIVE DAVIES requested clarification on what the dispute
is here.
MR. ELLIOT clarified that the original subdivision was set up with
46 lots. The original engineering that went to the ADEC for the
approval of the water system was very specific. It requested
engineering approval for 50 or less units. That is the
construction approval that they got from the ADEC and that is what
this system is currently approved for. With regards to the water
rights associated with the well, the only thing ever applied for
was the 46 units that are currently subdivided. The property that
the current developer would like to develop as phase two of this
property was never subdivided and is roughly an 11.5 acre piece of
land. The developer now wants to subdivide it and use the water
system for it. The original concept for the subdivision was that
fact would be part of the subdivision. The original engineering,
by the original developers, engineers and approved by the APUC,
very specifically delineates what would be done to the system to
operate it to meet the needs of that property if developed. The
homeowners association, in discussions with the developer, had
asked for nothing engineered that was not in that original
engineering by the ADEC. The developer simply does not want to
comply with the original engineering.
Number 0480
REPRESENTATIVE BERKOWITZ asked if the committee is going to hear
from the developer as well.
Number 0449
REBECCA PAULI, Attorney, Birch, Horton, Bittner and Cherot,
testified via teleconference from Anchorage. She stated that their
firm represents Robert Mellish in his Complaint against The
Crimsonview Owners Association. She indicated that Countrylane
Estates demonstrates how well the current system works. In that
case a lender requested a declaratory judgement as to whether the
homeowners association would be a public utility under state
statute. The commission said that they would be and they need a
statutory definition of a public utility, which is service to ten
or more people for compensation. Then the APUC recognized that the
association has many of the hallmarks of a cooperative and it would
not benefit the public to have the association economically
regulated. Under the statute AS 42.05.711(D) provided the
association with a public interest exemption, while repeating
jurisdiction to hear disputes that may arise. She said that is one
of their primary concerns with HB 185, is that in exempting water
utilities the only form left to resolve a dispute is the court
system, which is much more expensive and time consuming than the
APUC. Secondly, she feels it is important that the committee
understand that the situation that gave rise to this is that Mr.
Mellish will be a member of the association as will the individuals
that purchase the 22 homes. She wanted to relay Mr. Mellish's
experience in attempting to obtain water service. Even though HB
185 appears fairly benign, it raises the question of why not throw
in all the other public utility services as well. She thinks that
the reason for that is there are health and safety concerns that
certain types of utilities have very broad reaching social impacts.
MS. PAULI further stated:
Over the past two years Mr. Mellish has attempted to work
with the Association regarding his development of phase
two of the Crimsonview Subdivision. The association has
been both unreasonable and unfair in its demands of Mr.
Mellish. If HB 185 passes, Mr. Mellish's frustrating and
time-consuming experiences will become routine for other
developers. As discussed below, we believe HB 185 is
both anti-consumer and anti-development. First, I am
going to provide a brief background that will provide you
with an overview of Mr. Mellish's experience and then I'm
going to address why we believe this is unnecessary
reactive legislation. Then finally, I'm going to suggest
a couple of solutions. Following is a summary of the
undisputed facts as admitted by the Association in their
Answer to Robert Mellish's Complaint. The Crimsonview
Subdivision was designed and platted to be developed in
two phases. Phase one consists of 47 lots and phase two
consists of 22 lots. There is a community well and an
integrated loop distribution water system that was
designed to serve both phase one and phase two. So,
presently on these 22 lots you have a distribution system
that is connected to the well at phase one. The note on
the official platt provides that lot 11, block one of
phase one of this platt is the site of the community well
system, and will be exclusively used as such until such
time a connection of the subdivision's designed water
system to a possible city water system. At which time
the community well will be abandoned. As required by the
platt note, in 1984 phase one was developed with 46 lots
for single family residents and one lot for the community
well. In 1985 the water system was completed and this is
when the integrated loop distribution network was
installed.
TAPE 99-18, SIDE A
MS. PAULI continued:
... charge Mr. Mellish and they continue to control the
water. When Mr. Mellish was ready to develop phase two,
he was very conscientious and wanted to do it right, so
he hired the original engineering firm, that designed the
water system, to determine whether the existing system
under state standards would be adequate, and the original
engineering firm said they were. It's undisputed by all
the engineers that the aquifer is more than sufficient to
supply water to all 68 lots. The only thing that is not
sufficient is the pressure, which is equally resolved by
just adding that 2 horse power pump. However, Mr.
Mellish being very cautious hired a second engineering
firm to review the original engineering firms conclusion
that the distribution system was adequate. Upon
confirmation, Mr. Mellish informed the association of
plans to develop the 22 lots and this development would
necessitate the operation of a water distribution system.
... Throughout 1997 Mr. Mellish performed extensive work
to bring phase two into compliance with the
Matanuska-Susitna Borough subdivision requirements and he
hired Alaska Rim to design any necessary upgrade to the
system and address any association concerns.
Specifically the association was concerned about whether
they would have adequate water to water their lawns.
Alaska Rim prepared a proposal to satisfy APUC
requirements and propose that the associations concerns
be addressed for the scheduling of lawn watering. Now,
to address the association's concerns about the pressure
on the well, Mr. Mellish proposed to furnish and install
a 2 horse power booster pump and he also offered to
provide and install the multi-function automatic dialer,
which would monitor the systems operation, and
immediately report any deviation from the norm. ...
Finally, he was willing to establish and fund and escrow
account to cover the capital costs of a 10 horse power
pump that would be more than adequate to provide peak
capacity to replace the existing pump and booster that
should fail in the future. Warrant to ultimately
increase the systems capacity. Once again it's
undisputed that the existing distribution system is
adequately sized to serve all 68 lots.
CHAIRMAN HUDSON asked Ms. Pauli if she could focus on the intent of
the bill.
MS. PAULI continued:
What this is important for, is to show you that this is
before the APUC ever got involved. Mr. Mellish made
three different proposals to the association. Every time
the association came back and kept adding more things and
ultimately they wanted paved roads. It is important to
let you know that this is what is going to happen if HB
185 passes. It was only after the association demanded
that Mr. Mellish install, pay for and maintain a 30,000
gallon water facility above ground, ... he filed a formal
complaint at the APUC. Now, we filed a complaint in
September of 1998. The commission set it for hearing in
April. The association requested the hearing be
postponed, because the (indisc.) is working to their
favor for this development and this is what you will see
should this bill pass. HB 185 is unnecessary reactive
legislation intended to decide the complaint before the
APUC and force Mr. Mellish to refile in the court system.
... As you know, historically the APUC has not sought out
small water utilities such as homeowners associations for
regulation. The APUC only becomes involved in regulation
when asked to do so by a consumer or a lending
institution. ... The APUC retains jurisdiction to
resolve disputes in these situations, but grants the
association the public interest exemption that I
discussed earlier. ... Finding for the public interest
exemption, the state, through its legislative body, and
the APUC, widely recognize that consumers must have an
easily acceptable and friendly forum for dispute. The
most important function that the APUC provides is to
provide a forum where a (indisc.) or potential consumer
may be heard. If HB 185 becomes law, the only recourse
that a (indisc.) or potential consumer will have will be
the court system. ... I'd like the court system the APUC
has as a stated purpose to assist the consumer in
obtaining (indisc.) utility. In this case, the APUC
staff acted as an informal mediator in an attempt to
achieve a solution ...
Number 0498
REPRESENTATIVE COWDERY wondered if there is an adequate water
supply to address this now. He asked if it has been certified and
if there is fire protection. He also wondered about the existing
well.
MS. PAULI stated that Mr. Mellish agreed to provide more
compensation than what the other homeowners were paying. As far as
the water supply, it has been certified through their engineers and
the ADEC has approved the system. The existing system is seven
gallons per minute shy of being instantaneous providing peak
demand, but a booster pump will easily resolve that.
REPRESENTATIVE COWDERY interjected. He wondered about the supply
and the recovery rate, without considering the pump, has it been
certified.
MS. PAULI replied yes. The engineers have certified that it is
adequate.
Number 0641
REPRESENTATIVE PORTER stated that he would like to address two
issues. One, there seems to be some dispute about whether the
developer is or isn't meeting the original design that the original
engineer, although it be the same engineer, had designed for the
increase in the additional 27 lots. He wondered if the engineer
changed his mind. Two, what is it that the developer in phase two
is proposing. He wondered if the phase one residents would be
required to schedule their lawn watering, because of the
implementation of phase two. If that is the case he doesn't blame
them for resisting.
CHAIRMAN HUDSON indicated that the policy call of the committee is
pretty simple, that being, whether or not to add water to the
$50,000 annual exemption. It is not in all the detail that
specifically relates to The Crimsonview Subdivision, because the
legislature does not pass legislation to try to settle a single
issue.
REPRESENTATIVE DAVIES stated that one of the questions they should
be asking is whether they want The Crimsonview Subdivision to be an
example of the type of disputes that do arise, and if those
disputes should be handled in the court system or at the APUC.
Assuming that the APUC would operate in a timely manner, would that
be a good venue. In other instances they have looked at
alternative dispute resolution mechanisms; they have tried to put
into place situations where disputes can be resolved without going
to court. He argued that HB 185 should not be passed.
CHAIRMAN HUDSON said that is true, but he referred to Section 1
that is being proposed, it clearly states that they are exempt from
regulation unless the subscribers petition the commission for
regulation. It is trying to go to something that is relatively
small and provide the developers and the parties to be able to
bypass the regulatory process of the APUC or use it at their
discretion.
Number 0894
REPRESENTATIVE PORTER pointed out that the committee is familiar
with the processes and delays involved in APUC. There are a myriad
of alternative dispute resolutions that are available rather than
APUC.
Number 0964
REPRESENTATIVE DAVIES referred to Representative Hudson's comment
that unless the subscribers petition the commission. The problem
with that is there would have to be a majority of the existing
property owners petitioning to come under regulation, so that the
dispute could not be resolved under the APUC and it would have to
go to court. He wanted to draw their attention to other provisions
in statute, such as Title 29, where it talks about the general
desirability of not forming a new service area if a service can be
provided by adding onto an existing one. He indicated that taking
action that would not at least facilitate that kind of discussion
and dispute resolution, shy of going to the courts, is contrary to
the general intent of the statutes and the constitution.
Number 1050
CHAIRMAN HUDSON announced that he was going to hold HB 185 over
until the next meeting.
ADJOURNMENT
CHAIRMAN HUDSON adjourned the House Special Committee on Utility
Restructuring meeting at 9:55 a.m.
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