Legislature(1999 - 2000)
04/28/1999 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 28, 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
Representative Joe Green (alternate)
MEMBERS ABSENT
All members present
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 CONCURRENT RESOLUTION NO. 10
Proposing recommendations concerning the sale of the Four Dam Pool
hydroelectric facilities.
- MOVED CSHCR 10 (URS) OUT OF COMMITTEE
* HOUSE BILL NO. 174
"An Act relating to personal services contracts for certain
employees of electric cooperatives."
- HEARD AND HELD
HOUSE BILL NO. 185
"An Act exempting certain small water utilities from regulation by
the Alaska Public Utilities Commission."
- SCHEDULED BUT NOT HEARD
* HOUSE BILL NO. 169
"An Act relating to including the costs of expansion activities and
political activities in rates of electric cooperatives."
- SCHEDULED BUT NOT HEARD
(* 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
4/21/99 (H) HEARD AND HELD
4/23/99 (H) L&C AT 3:15 PM CAPITOL 17
4/23/99 (H) <BILL POSTPONED TO 4/30>
4/28/99 (H) URS AT 8:00 AM CAPITOL 120
BILL: HCR 10
SHORT TITLE: SALE OF FOUR DAM POOL
SPONSOR(S): REPRESENTATIVES(S) AUSTERMAN, Harris, Grussendorf
Jrn-Date Jrn-Page Action
4/22/99 914 (H) READ THE FIRST TIME - REFERRAL(S)
4/22/99 914 (H) URS, FIN
4/28/99 (H) URS AT 8:00 AM CAPITOL 120
BILL: HB 174
SHORT TITLE: ELECTRIC COOPERATIVE EMPLOYMENT CONTRACT
SPONSOR(S): REPRESENTATIVES(S) SANDERS
Jrn-Date Jrn-Page Action
3/31/99 628 (H) READ THE FIRST TIME - REFERRAL(S)
3/31/99 628 (H) URS, L&C
4/28/99 (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
4/21/99 (H) HEARD AND HELD
4/28/99 (H) URS AT 8:00 AM CAPITOL 120
BILL: HB 169
SHORT TITLE: ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY
SPONSOR(S): REPRESENTATIVES(S) GREEN
Jrn-Date Jrn-Page Action
3/31/99 625 (H) READ THE FIRST TIME - REFERRAL(S)
3/31/99 625 (H) URS, L&C
4/28/99 (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: Introduced the committee substitute for HB 81.
ERIC YOULD, Executive Director
Alaska Rural Electric Cooperative Association (ARECA)
703 West Tudor Road
Anchorage, Alaska 99503
Telephone: (907) 463-3636
POSITION STATEMENT: Testified on HB 81 and HB 174.
ROBERT MAXWELL
126 Boaters Lane
Fairbanks, Alaska 99707
Telephone: (907) 479-0592
POSITION STATEMENT: Testified on HB 81.
MARY ANN PEASE
Aurora Power Resources, Incorporated
310 K Street, Number 601
Anchorage, Alaska 99501
Telephone: (907) 277-1003
POSITION STATEMENT: Testified on HB 81.
MEERA KOHLER, General Manager
Municipal Light and Power (ML&P)
1200 East First Avenue
Anchorage, Alaska 99501
Telephone: (907) 263-5202
POSITION STATEMENT: Testified on HB 81.
ROBERT WILKINSON, Chief Executive Officer
Copper Valley Electric Association (CVEA)
Box 45
Glennallen, Alaska 99588
Telephone: (907) 822-8340
POSITION STATEMENT: Testified on HB 81.
RANDY CORNELIUS, Director
Electric Utility, Sitka City and Borough
P.O. Box 1253
Sitka, Alaska 99835
Telephone: (907) 747-2661
POSITION STATEMENT: Testified on HB 81.
PAUL MORRISON
1016 West Sixth Avenue, Number 400
Anchorage, Alaska 99501
Telephone: (907) 269-6222
POSITION STATEMENT: Testified on HB 81.
CLIFF STONE, Legislative Assistant
for Representative Austerman
Alaska State Legislature
Capitol Building, Room 434
Juneau, Alaska 99801
Telephone: (907) 465-2487
POSITION STATEMENT: Introduced HCR 10.
ED KOZAK, General Manager
Kodiak Electric Association
515 Marine Way
Kodiak, Alaska 99615
Telephone: (907) 486-7700
POSITION STATEMENT: Testified on HCR 10.
BOB EVANS, Lobbyist
for Copper Valley Electric Association and Four Dam Pool
227 Fourth Street
Juneau, Alaska 99801
Telephone: (907) 586-6252
POSITION STATEMENT: Testified on HCR 10.
RICHARD TRIMBLE, Alternate Representative
Project Management Committee
Four Dam Pool;
Power Project Manager, Ketchikan Public Utilities (KPU)
EDWARD BURKE, Legislative Administrative Assistant
for Representative Sanders
Alaska State Legislature
Capitol Building, Room 414
Juneau, Alaska 99801
Telephone: (907) 465-4945
POSITION STATEMENT: Introduced HB 174.
ACTION NARRATIVE
TAPE 99-19, 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, Berkowitz and Green (alternate). Representative Davies
arrived at 8:12 a.m.
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 0143
REPRESENTATIVE ROKEBERG made a motion to adopt the proposed
committee substitute for HB 81, version 1-LS0181\G, Cramer,
4/26/99, as a work draft. There being no objection, Version G was
before the committee. He indicated that the committee substitute
includes the suggestions by Karl Rabago of CH2M Hill and the
recommendations by Representative Davies.
JANET SEITZ, Legislative Assistant for Representative Rokeberg,
Alaska State Legislature, explained that on page 1 the title has
been tightened up as the committee requested. On page 2, lines 7
through 20 there is new language about free basic information and
reasonably priced additional information to be granted to the
consumer, which was a suggestion by Mr. Rabago and Representative
Davies. On page 2, lines 24 and 25 there is a language change to
take out "without discrimination", which was suggested by Mr. Conn
of Alaska Public Interest Research Group (AKPIRG). On page 2, line
28 after "confidential records" through page 3, line 7, there was
some language added by the request of Representative Davies to make
it clear that a regulated and unregulated component of an entity
must keep customer records confidential unless there is a written
request by the consumer to share information. On page 3, line 22
after "certification", Representative Davies requested that "these
standards must explicitly provide for reliable and safe electrical
power" be added. On page 3, beginning on line 28 after
"generation" through page 4, line 10, is all new language. The
first part on page 3 of subsection (e) concerns the consumer bill
and Mr. Rabago had suggested language that if an aggregator wanted
to get some information on the bill it should be without undue
process and non-discriminatory rates. In subsection (f) there is
the slamming provision that indicates that a costumers electrical
service provider may only be changed with the written authorization
of the customer, which she believes was Mr. Conn's concern. In
subsection (g) there is Mr. Rabago's suggestion on requiring
certain reports from electric service providers. In subsection (h)
there is the definition of competitive electric service market,
which was discussed in the committee.
REPRESENTATIVE COWDERY referred to page 3, line 23, where it talks
about "reliable and safe electrical power." He wondered how that
is defined.
MS. SEITZ indicated that she does not have a definition of
"reliable and safe electrical power."
REPRESENTATIVE COWDERY pointed out the purpose of his question is
that sometimes in rural areas it is less reliable than in non-rural
areas.
Number 0545
REPRESENTATIVE DAVIES explained that it is a policy that they are
setting and something that can be dealt with in the practical
application of the regulations.
REPRESENTATIVE ROKEBERG agreed with Representative Davies, in that,
reliability and safety standards are elements that need to be
considered when providing service to a service area.
REPRESENTATIVE PORTER stated that it is an absolute and an absolute
cannot be guaranteed, so there needs to be a qualifier.
REPRESENTATIVE ROKEBERG pointed out that in that subsection the
commission is to adopt the regulations.
Number 0620
REPRESENTATIVE PORTER reiterated that they do not want an absolute
in statute.
CHAIRMAN HUDSON indicated that when the committee talked about HB
81 last time, he felt that reliability should be put in as well.
He asked Representative Rokeberg if they have been instructed by
Mr. Rabago.
REPRESENTATIVE ROKEBERG pointed out that it was a suggestion by
Representative Davies.
REPRESENTATIVE DAVIES recommended that they add some reference to
generally accepted industry standards.
CHAIRMAN HUDSON asked Representative Davies if he wanted to move
the amendment.
Number 0780
REPRESENTATIVE DAVIES made a motion to adopt the conceptual
amendment, "line 23, after the word power, insert, that meets
generally accepted industry standards." There being no objection,
the conceptual amendment was adopted.
REPRESENTATIVE COWDERY stated that the bill is premature, because
it anticipates competition. He does not believe that the committee
has decided to go with competition yet.
REPRESENTATIVE BERKOWITZ pointed out that Representative Cowdery
should have supported his amendment last week to remove
"competitive," because HB 81 is really about a general consumer
protection issue.
CHAIRMAN HUDSON wondered if he means as opposed to leading to
competitiveness.
REPRESENTATIVE BERKOWITZ explained that that way when markets
emerge that are competitive they have already complied.
Number 0938
REPRESENTATIVE ROKEBERG stated that the design of HB 81 is that it
is intended to be "trip wired" by the implementation of any
competitive electrical service in the state. He doesn't believe
that it is necessarily appropriate given the work load and the
situation the Alaska Public Utilities Commission (APUC) is in right
now to have them come up with a bunch of new regulation when the
committee is potentially on the verge of shifting their focus to
some type of restructuring. He recalls the testimony regarding the
ability of the APUC currently, particularly in the form of the
docket that is before the APUC from Aurora Power that would act as
an aggregator and, therefore, a "trip wire" in order for HB 81 to
take effect. The regulations that would be provided in this
legislation would have to be undertaken and drafted concurrently
with that docket. He said that the legislation is not intended to
force that; it is trying to be anticipatory in that regard.
Number 1029
REPRESENTATIVE DAVIES indicated that the task force did find that
competition could be shown to benefit the consumers. Further, they
have found that the APUC does have the power to grant competition
in certain areas. The last point is that it would be appropriate
to have HB 81 in place before the pilot project in Anchorage takes
place. He said that for those reasons he feels that HB 81 is not
premature.
REPRESENTATIVE COWDERY indicated that the committee should decide
what the competition issue is. He still feels that HB 81 is a
little premature.
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative
Association (ARECA), stated that his utility members have had a
chance to review HB 81 and they are generally in favor of the
legislation, with certain caveats. He indicated that there is some
reluctants to the bill, in that, it is a bit premature. On the
other hand, he believes that Representative Davies argument is
valid as well. The only real objection to HB 81 is that it may
coopt utilities that are not presently subject to economic
regulation. The way that the bill is written it implies that many
of the provisions of the APUC would be imposed on those utilities.
He recommended that there be an amendment to HB 81 so the utilities
would not become coopted into economic regulation. He referred to
page 1, on line 6, where it states, "The commission shall establish
by regulation," they would include the language, "for those
utilities subject to economic regulation by the APUC." On page 4,
they would add a subsection (i), which would state, "Nothing in
this section would result in a utility becoming subject to economic
regulation by the APUC." In other words, those that are legally
required to be economically regulated would remain regulated, but
those that are not required to be regulated would not be regulated
as a result of the statute.
Number 1333
REPRESENTATIVE DAVIES wondered exactly what the term "economical
regulation" implies in a competitive market place. Presumably,
even deregulated utilities would be subject to some minor forms of
economic regulation. He wondered how that terminology would apply
in that context.
MR. YOULD explained that what is being discussed is a definition of
"regulation." If the committee decides that they want the electric
utility industry to be regulated even in a minor way the additional
regulations and re-regulation statutes will be adopted, which will
coopt what the committee has before them presently.
REPRESENTATIVE ROKEBERG expressed concern about the effect of the
regulatory environment if the regulation is adopted. It seems that
it would be an incentive for those utilities that were concerned
about this to endeavor to opt out. He wondered how the utilities
that had opted out would be able to react to the competitive
environment without the regulatory underpinning.
MR. YOULD asked, "Can you imagine a utility trying to go to its
membership saying, We need a two-thirds vote to get out of economic
regulation, so that you don't have access to the consumer bill of
rights." He indicated that his utilities are in favor of HB 81 and
it's not because of an opportunity to opt out of the APUC. He
believes that there is no problem in ensuring that there are
certain stipulations and standards that the utility industry needs
to meet under a competitive market, but that doesn't mean they have
to be under economic regulation.
REPRESENTATIVE ROKEBERG stated that they have had some testimony
from Mr. Wilkinson of the Copper Valley Electric Association (CVEA)
and he indicated that it was not HB 81, but the whole idea of
deregulation caused CVEA's consumers to decide to opt out. He
pointed out that it seems to be a circumstance that goes against
the grain of what Mr. Yould just said.
MR. YOULD stated, "Quite to the contrary." He said that they view
that as allowing a utility the flexibility to fully compete in a
deregulated industry. For instance, if the utilities have to run
back to the APUC every time they want a rate change, to compete
with an aggregator that has come into their service territory, then
they don't have the flexibility to truly compete. What the
utilities are really trying to do is get out from the APUC
jurisdiction so that they can change their rates in the event that
an aggregator or "cherry picker" comes into their service territory
and tries to take a customer away. It actually works in favor of
customer choice, because if somebody comes in and wants to take
their customers they want to be able to go straight to that
customer and give him a better deal. He thinks that getting out of
regulation is a step toward getting out of an unstructured market.
Number 1568
REPRESENTATIVE DAVIES asked Mr. Yould if he would restate the
concern of his members. He feels that the bill doesn't focus on
the provider, but on the consumer. It defines a competitive
electric service market, and that is when consumers are offered a
choice. He pointed out that if a provider of any strife is
operating in a competitive market then consumers should be afforded
those kind of protections.
Number 1619
MR. YOULD indicated that the concern is in order for the APUC to
exercise its jurisdiction on a utility that presently is not
subject to jurisdiction they are going to start requiring many
things out of that utility perhaps having to do with rate and
contracts that allows the APUC to exercise its jurisdiction.
Therefore, in a backdoor way the utilities are going to become
subject to regulation just through the process of trying to enforce
the statute. He added that the committee should consider reviewing
Mr. Wilkinson's testimony given in the previous meeting.
REPRESENTATIVE GREEN wondered how many members feel that the bill
is premature.
MR. YOULD stated that there was that general feeling that it may be
premature, but weighed against that is that they are technically in
a deregulated market.
Number 1734
ROBERT MAXWELL testified via teleconference from Fairbanks. He
indicated that he only has the original version of HB 81 and,
therefore, his comments will be truncated. He referred to Section
1, subsection (5), of the original bill where it states, "penalties
for electric service providers operating in a competitive electric
service market who fail to comply with the requirements of this
chapter." He stated that he would prefer to see some language that
would say, "substantial penalties." He explained that in the lower
48 the penalties have not been substantial enough and people will
go ahead and circumvent regulations in order to make a profit. He
referred to Section 1, subsection (7), of the original bill where
it states, "refrain from imposing unreasonable terms and conditions
as a precondition to providing service to a consumer in a
competitive electric service market." He stated that he likes that
language and would like to see that there are not unreasonable
disconnect and reconnect fees attached to consumers that may have
problems paying their bills. He believes that it could put lower
income folks into a cycle that they could never get out of.
CHAIRMAN HUDSON pointed out that version G of HB 81 was faxed to
them.
Number 1851
MARY ANN PEASE, Aurora Power Resources, Incorporated, testified via
teleconference from Anchorage. She indicated that she sent in four
pages of written testimony and was not going to reiterate what she
presented in that testimony, but she added that they are supportive
of HB 81. They feel that the electric consumer's bill of rights is
an appropriate first step towards deregulation. She referred to
the comments of Mr. Yould and stated that she finds it interesting
that they are considering adding language to the bill to opt out of
economic regulation, so that the utilities could be more able to
deal with competitive pricing. She pointed out that this goes back
to the argument that she has made several times, which is that when
ever possible market based rates are much better than regulated
based rates. If the utilities need the option of opting out of
economic regulation so they can compete, it says that there is
something left on the table. She explained that what they need to
look at is moving forward towards a deregulated utility environment
where prices are based on the market rather than on regulation.
Number 1918
MEERA KOHLER, General Manager, Municipal Light and Power (ML&P),
testified via teleconference from Anchorage. She indicated that
she sent in three pages of written testimony. She expressed the
support of ML&P for the context of HB 81. They believe that
Representative Rokeberg has done a good job with protecting the
interests of the consumers and that consumer protection is a matter
of central and critical importance in any effort to restructure the
electric utility industry. She noted that in the CH2M Hill study
they state that misdirected restructuring efforts can impact
consumers adversely in terms of availability, cost and reliability
of electric power. HB 81 begins the process of ensuring that as
restructuring moves forward the consumer's interests are not left
behind, subjugated to the inequities of the marketplace. She
indicated that they have four suggestion. One, although critical
components in the restructuring equation, the provisions of HB 81
do not address all the elements which the commission must address
to successfully investigate electric restructuring. This fact is
made clear by the CH2M Hill, which outlines the broad array of
matters, including those in HB 81, which require examination. ML&P
recommends that under the proposed Section 42.05.226(a) be amended
to read:
*Sec. 42.05.226. Electric consumer protections. (a) As part
of any general proceeding or proceedings to investigate
electric industry restructuring, the Commission shall
establish by regulation [etc.]
Two, at least one would-be electric service provider has already
asserted that it is not subject to the jurisdictional powers of the
commission concerning utility service provisioning. The proposed
legislation uses various terms at various points, for example,
"electric service providers," "electric suppliers, aggregators, and
distributors" and "supplier or an aggregator." ML&P suggests that
they the phrase "electric service supplier" be uniformly utilized
throughout the proposed legislation and that the following
amendment be added to Section 1:
(f) For purposes of this section, "electric service provider"
shall mean any person or entity, including but not limited to
a utility, a broker, a marketer, a wholesaler, or an
aggregator, seeking to provide or providing electric service
to the public or any portion thereof, whether for compensation
or otherwise.
Three, the experience in telecommunications restructuring, as well
as in those few jurisdictions which have undertaken electric
restructuring, clearly demonstrates that more consumer data is not
the same thing as more consumer information. CH2M has noted in
there study, "Equipping all customers with the education and
technological capacity to fully participate in markets
characterized by changing hourly electricity costs could easily
overwhelm any savings likely to result from the introduction of
competition into the industry." She stated that while ML&P does
not disagree with the direction of the draft provisions, they
believe that any legislative intent accompanying HB 81 should make
clear that the goal of the legislation here is clarity, not volume
of information, and that the cost of such information are
recoverable from the rates charged to consumer. Four, ML&P has
received a copy of CH2M Hill's comments on HB 81, addressing five
numbered items. ML&P believes that items 4 and 5 in those comments
deal more with competition and competitive structures than with
consumer protection, and are neither properly nor effectively
addressed by minor amendments to HB 81. Competition produces
benefits where it promotes reduced costs of service. In seeking to
inject issues concerning "customer proprietary network information"
and access to billing and other "back office" support systems, CH2M
Hill's comments open very broad topics with implications far beyond
consumer protection. She added that consumer protection is an
important piece, but only one piece of the puzzle. The other
parts, requiring 15 pages of summarized "recommendations" in the
study, also require thoughtful attention in the manner proposed by
the study. ML&P supports the CH2M Hill study concept of methodical
investigation and implementation of the issues. The approach
suggests that the competitive issues be reserved for separate
commission and legislative actions, and not be lightly injected
into an otherwise sound piece of legislation on a different
subject. ML&P appreciates the opportunity to provide there
comments and recommendations and wants to support the committee and
sponsors of HB 81. She pointed out that electric cooperatives are
allowed to exempt themselves from economic regulation by the APUC
per action that was taken in 1980; therefore, she believes that
when Mr. Yould was speaking to that process he was actually
referring to an old piece of legislation.
Number 2235
ROBERT WILKINSON, Chief Executive Officer, Copper Valley Electric
Association (CVEA), indicated that he did send in written
testimony, so his comments will be brief. CVEA's concern with the
bill is specifically with the definition of a "competitive electric
service market," and they believe currently with the issue of
public power in rural Alaska that the definition is somewhat broad.
As the committee and the state of Alaska go down the trail of
industry restructuring, they feel that the more prudent course of
action would be to move in small steps rather than open things wide
open, which they feel is what HB 81 does. He explained that with
respect to CVEA's decision to conduct a local regulation campaign
last year, in which there was a two-thirds vote to do so, their
motivation was to prepare themselves to do business in a
competitive environment. The mission of CVEA is to be the energy
services provider of choice, which requires them to be the low cost
provider. That is how they beat the competition a couple years ago
that was attempting to "cherry pick" some customers, and that is
how they intent to do it in the future. CVEA believes that the
language in HB 81 needs to be tightened up.
Number 2335
REPRESENTATIVE DAVIES asked Mr. Wilkinson if he has any suggestions
on how to tighten the language in the bill.
REPRESENTATIVE WILKINSON pointed out that Mr. Yould made some
suggestions early. He indicated that he hasn't really given it any
thought, but that he can make some suggestions and send them to the
committee.
REPRESENTATIVE PORTER wondered if the tightening up that Mr.
Wilkinson is referring to has to do with the definition of
"competitive electric service market."
MR. WILKINSON responded correct.
REPRESENTATIVE ROKEBERG stated that he was unsure what the thrust
was behind tightening up.
Number 2393
MR. WILKINSON explained that with the overall restructuring issue
and the questions that were raised by the CH2M Hill study that
there are many unresolved issue. They feel that by opening
competition across the state is premature at this time. They
propose that the definition be tightened up, so if the intent of
the committee is to have competition in the interconnected area of
the Railbelt, then HB 81 should reflect that.
REPRESENTATIVE ROKEBERG asked Mr. Wilkinson if the committee and
any bills on restructuring built a Chinese Wall around the Railbelt
if that would make him happy.
MR. WILKINSON indicated that he was not sure how to answer that
question. He stated that it would make him happy for a short
period of time, until more of the questions of the CH2M Hill study
are answered.
Number 2453
RANDY CORNELIUS, Director, Electric Utility, Sitka City and
Borough, testified via teleconference from Sitka. He pointed out
that the City and Borough of Sitka has been concerned about the
customer all along and he believes that HB 81 is trying to address
that. The only comment is that they feel it brings them under the
jurisdiction of the APUC.
TAPE 99-19, SIDE B
Number 2473
MR. CORNELIUS stated that if HB 81 brings them under the APUC, they
will end up being regulated by two regulators. He believes that
they need to take small steps for the municipalities to start
breaking out from underneath assembly jurisdiction and either go
into the APUC or drop APUC. He pointed out that it should be one
way or the other, but it is unfair to have them under two
regulators and it would be difficult for them to compete like that
in a marketplace.
REPRESENTATIVE DAVIES stated that there are different ways in which
utilities are under regulation by the APUC. All utilities in the
state are under regulation by the APUC in terms of their territory,
and some utilities get to opt out in terms of economic regulation.
He believes that HB 81 would say that all utilities who choose to
provide competitive retail service will be affected, and the
details of economic regulation would not matter. HB 81 is not
intended to affect the decision of whether a utility opts in or
out, but no matter what choice they have made, if they are offering
competitive retail service, they will be affected by HB 81.
Number 2382
REPRESENTATIVE ROKEBERG indicated that it seems that the APUC can
grant the certification for a service area. He stated that he is
concerned about the present circumstances, because if somebody
wanted to compete they would have to get the approval by the APUC
to enter into a service area and then be regulated perhaps by the
local assembly or city council if they were in an opt out
situation. He wondered if the tariff setting and the competition
would be regulated by the local governing body after the APUC
granted permission to enter the area.
Number 2286
MR. YOULD said that he would tend to agree that it could overlay
both subsets; regulated and non-regulated. The intent is to make
sure that those that opted out of regulation or were not intended
to be under regulation are not drug into regulation. As APUC is
presently funded through the regulatory cost charge, which is a
charge that is applied to those that are regulated, and on a case
by case basis, those that are unregulated, but have to come in for
a hearing.
REPRESENTATIVE ROKEBERG indicated that the circumstance has not
happened yet, but it could. He wondered if his statement was true
that the APUC would have to grant the ability of a competitor to go
into a non-economically regulated area in the first instance,
because of the service area certification.
MR. YOULD said yes, because of the service area certification.
REPRESENTATIVE ROKEBERG asked if once the end of the area the local
governing body would have economic regulation.
MR. YOULD said that they could come back and impose their right
through the APUC to that exclusive service territory, but they
would not be subject to economic regulation.
REPRESENTATIVE ROKEBERG indicated that the legislation would be
forced on non-economically regulated opted out utilities the way
the bill is written presently. He wondered what happens if they
are already opted out, for example Copper Valley, and the APUC
granted somebody certification to go in there and compete with
them. He asked who is going to regulate the economic regulation.
MR. YOULD stated that he thinks that the economic regulation is
imposed on top of Copper Valley whether somebody is trying to get
into their service territory or not.
REPRESENTATIVE ROKEBERG wondered if it is an automatic opt in if
there is an additional certificate granted.
MR. YOULD replied no. He stated that they are trying to make sure
that it doesn't happen. For example, that Copper Valley, just by
somebody coming into their service territory, and hence becoming
subject to the consumer bill of rights, doesn't become subject to
economic regulation.
Number 2228
PAUL MORRISON testified via teleconference from Anchorage. He
stated that he believes the current statute has it so that if there
is competition in the field they are required to become regulated
by the APUC.
MR YOULD indicated that the concern with HB 81 is that it implies
that competition is allowed in areas that have opted out of
economic regulation, and then they get coopted into economic
regulation, which is what they are trying to keep from happening.
REPRESENTATIVE DAVIES stated that HB 81 is merely establishing the
basic ground rules under which consumers would be protected. He
explained that there are several other steps that have to happen
before there is competition. He pointed out that it seems bizarre
that the APUC would establish a set of regulations that would open
up a service area to competition, and then in the course of that
require that somebody already there come under economic regulation.
He stated that they distinguish the two different kinds of
regulation. Utilities in the state, even in a free and open
marketplace, are going to be regulated by the APUC, but in terms of
economic regulation that is exactly the opposite of retail
competition.
REPRESENTATIVE BERKOWITZ explained that HB 81 is not intended for
the benefit of the providers, the suppliers or the distributors.
It is really for the benefit of the consumers. He expressed
appreciation for the anxt that everyone has exhibited, but it isn't
the point of what HB 81 is all about.
Number 2120
REPRESENTATIVE PORTER agreed with Representative Davies. He stated
that if it is the case, which he is suggesting by inference and it
is ridiculous, then the economic regulation would be done by the
board of the competitor of the electric service coming in.
REPRESENTATIVE ROKEBERG pointed out that the whole issue is being
opened up, and it is hard not to consider alot of things when
discussing it. He thinks that a considerable look needs to be
taken, although there is a need to have the legislation this year.
In response to what Representative Davies said about not
understanding how there could be economic regulation, in other
states where they have deregulation there is the institution of a
service credit where the regulators come in there and mandate a
reduction in their rate.
REPRESENTATIVE DAVIES indicated that is not economic regulation,
but is meant to recover stranded costs.
REPRESENTATIVE ROKEBERG stated that the idea is to lower the
affordability level to make a reduction to consumers.
REPRESENTATIVE DAVIES stated that maybe he misunderstood.
REPRESENTATIVE ROKEBERG explained that in other states they have
legislatively mandated a reduction in the rates and the surcharge
comes back to recover the stranded cost.
Number 1975
CHAIRMAN HUDSON announced that HB 81 would be held over until the
next meeting.
HCR 10 - SALE OF FOUR DAM POOL
CHAIRMAN HUDSON announced that the next order of business was House
Concurrent Resolution No. 10, proposing recommendations concerning
the sale of the Four Dam Pool hydroelectric facilities.
Number 1926
CLIFF STONE, Legislative Assistant for Representative Austerman,
Alaska State Legislature, stated that the adoption of HCR 10 will
request the Alaska Energy Authority (AEA) to divest itself of its
interest in the Four Dam Pool. These projects were constructed in
the mid-1980s and they served the communities of Copper Center,
Glennallen, Ketchikan, Kodiak, Petersburg, Port Lions, Valdez and
Wrangell. Representative Austerman took HCR 16 and used it as a
template to construct HCR 10. The wording, "fair market value,"
has been subject to some question; can we really expect this to go
out to the market in the form of a request for proposals (RFP) and
will it be open to just those communities listed or will people be
given the opportunity to bid on this RFP?
Number 1812
REPRESENTATIVE BERKOWITZ noted, "The Sitka wildflower has cropped
up amongst the devils club again on this sponsor sheet." He
wondered how much money will go into the general fund on account of
the sale when the dust settles.
REPRESENTATIVE AUSTERMAN responded that a lot of numbers have been
thrown around. The question is, what is the fair market value? He
said that he would love to see $125 million go into the general
fund, but he has heard numbers a lot lower than that, so it is
anyone's guess.
REPRESENTATIVE DAVIES said that when the issue was dealt with last
there was a major concern with the term, "commitment of the price."
He asked the committee if they remembered something of that nature.
He indicated that in the construction of the dams, he believes
there was a certain price that was guaranteed to communities.
REPRESENTATIVE AUSTERMAN explained that there is a power sales
agreement that is a 40-year agreement that was originally signed
with the construction of the dams and it has been a problem all
along. Senator Grevel, when he was attempting to purchase this, it
became obvious that he would have to break that power sales
agreement to make his agreement work, and that is why HCR 10 is
directing Alaska Energy Authority (AEA) to go out into the
community to negotiate. He said that there are a lot of
liabilities the state of Alaska has with the four dams, and he
would like to see the state get out of the liability.
Number 1678
REPRESENTATIVE DAVIES referred to line 12 of HCR 10, where it
states, "WHEREAS the Alaska Energy Authority retains, under the
power sales agreement, significant liabilities relating to the
power project," but in the "resolves" it is not mentions. He
wondered if it is Representative Austerman's intent to continue to
honor the power sales agreement.
REPRESENTATIVE AUSTERMAN stated that the intent is that the state
of Alaska get out of the agreement all together; The AEA sell the
four dams as a consortium or individually to each community. The
best thing that could happen is for the Four Dam Pool to become the
Four Dam Pool Inc. and buy the facilities and everything from the
state of Alaska.
Number 1620
REPRESENTATIVE DAVIES wondered if the power sales agreement is a
commitment to the consumers in that area; that the liability being
referred to is the state's contract with the consumers in the
region, which means that there would have to be some concurrence by
those consumers.
REPRESENTATIVE AUSTERMAN replied correct. He indicated that he
would have to have someone that has been more directly involved
with the sales agreement in order to provide a definite answer on
how they would address that issue.
REPRESENTATIVE GREEN stated that it seems that the sale of the Four
Dam Pool would have to be an all or nothing thing, as opposed to
one at a time.
REPRESENTATIVE AUSTERMAN stated that he believes the AEA cannot
divest one unit without all four units agreeing to it.
Number 1534
REPRESENTATIVE PORTER asked if the utilities being serviced by the
Four Dam Pool have a first right of refusal.
REPRESENTATIVE AUSTERMAN replied that he does not know and would
have to defer to one of the utilities themselves. He said that he
does know all four units could be sold individually if they all
agree. The divestiture and the power sales agreement have been the
biggest problem with why the Four Dam Pool has not sold in the
past; if there is an outside entity they don't want to except the
power sales agreement and everything else tied to it. Later on
when the income stream was set up and divided it up there was
nothing in the agreement that protected the state, but did protect
all the utilities. There is a self-help clause within the whole
thing; if the state doesn't come up with general funds to prepare
the dams then they have there self-help clause and they can take
their income stream that is being divided up and make the repairs.
He added that the problems that existed when this agreement was set
up are being worked out now.
ED KOZAK, General Manager, Kodiak Electric Association (KEA),
testified via teleconference from Kodiak. He stated that KEA is a
member-owned non-profit cooperative that has provided service to
Kodiak and the village of Port Lions for 57 years. The KEA Board
of Directors and management staff strongly support HCR 10. They
believe that it is through the sale of the Four Dam Pool that long
term economic strength is promoted in their utilities in the
community. He asked, "Why should we support ownership?" He said
that first, significant opportunities for rate reductions, cost
control, reliability and protection of service are there with
utility ownership. There is the potential for increased economic
development opportunity in the community with local control and
decision making authority. The personnel knowledge and training
necessary to keep the project well maintained is already in place.
He said that they feel it is critically important with the isolated
stand-alone electric utilities that are in the Four Dam Pool.
Electric utilities served by the Four Dam Pool are either a
cooperative or a municipal, which means that 100 percent of the
savings will remain with the people in the state of Alaska. In
example, over $3 million in capital credits have been returned by
KEA to its members over the last three years. He added that the
Kodiak Chamber of Commerce and the City of Port Lions have both
passed resolutions in support of local ownership. He indicated
that the state has divested boat harbors and roads to the local
communities; therefore, it makes perfect sense to divest the Four
Dam Pool to the local communities as well. It is their belief that
local ownership of the projects will result in rate reductions at
the retail levels and the sale of the projects to the utilities
will provide a stable economic base in all eight communities that
are served by the projects, which will result in a stronger state
of Alaska.
Number 1256
REPRESENTATIVE PORTER wondered whether or not the utilities in the
communities have the first right of refusal under the power sales
agreement.
MR. KOZAK replied that the power sales agreement is a 45-year
agreement, in which, the state and five communities are signatory
to that agreement and all the utilities are contracted by that
agreement to buy all of their energy from the projects that the
serve the community. He added that he believes the answer to
Representative Porter's question is yes.
Number 1219
CHAIRMAN HUDSON pointed out that it may be true.
REPRESENTATIVE DAVIES wondered if one of the communities was not in
favor of the implied change in the contract if they would have a
veto power.
MR. KOZAK responded that any change in the power sales agreement
has to be agreed to by all the parties that signed the agreement.
BOB EVANS, Copper Valley Electric Association, Four Dam Pool,
stated that he believes he is hearing two questions; Representative
Davies is responding to a question that deals with the power sales
agreement and the right of each community to be unanimous in their
decision making and Representative Porter is asking whether or not
the communities have the first right of refusal of the sale of the
projects. The questions merge in some respects. If there is going
to be a sale of the projects, ultimately it is going to require the
approval from each of the communities to give up the power sales
agreement. The reality is in the municipalities; it is going to
require a vote of the people.
Number 1070
RICHARD TRIMBLE, Alternate Representative, Project Management
Committee, Four Dam Pool and Power Project Manager, Ketchikan
Public Utilities (KPU), testified via teleconference from
Ketchikan. He stated that Ketichikan has consistently supported a
divestiture of the Four Dam Pool facilities to the purchasing
utilities. He indicated that KPU has worked hard to craft an
agreement that works for both the Four Dam Pool communities and the
state. They feel that HCR 10 seeks to accomplish this objective.
On the other hand, they do not support the concept of selling the
facilities under a general RFP, because they do not believe the
Four Dam Pool communities or the state of Alaska will be best
served through that process. He asked will the RFP process bring
a higher price for the Four Dam Pool? He said that it won't bring
a better price from the purchasing utility. He pointed out that
they are not in a good position to respond to an open RFP. He
asked will a RFP bring a higher price for the Four Dam Pool from a
private enterprise? He responded that is possible, but in the long
run it is a losing proposition for the state. The risks that were
jointly evaluated by the communities and the state during the
vestiture negotiations are real. The communities have been prudent
in their evaluation of that risk, because they recognize that they
will bear them for decades to come. He said that it will be the
communities and the state who will be left holding the bag when the
risks do materialize and the venture fails; therefore, relieving
the state of the liabilities is a vestiture to the Four Dam Pool.
He indicated that they are ready to proceed; however, they do not
support an RFP process.
Number 0890
REPRESENTATIVE PORTER explained that in his reading of the
"RESOLVE" in HCR 10, the only divestiture that would be available
would be to the individual communities or a consortium of the
community; there is no opportunity for an outside proposer under
the RFP.
MR. EVANS pointed out that if there was an RFP and a higher bidder,
other than one of the communities, each community would have to
approve the third party purchaser to take control of the power
sales agreement. If the communities chose not to, presumably the
state could still sale the property, but they would also retain the
risk under the power sales agreement; therefore, without the
approval of the communities the state cannot assign the risk under
the power sales agreement.
Number 0802
REPRESENTATIVE PORTER said that he is assuming the permission would
not be given, so the opportunity of an outside purchaser is mute.
REPRESENTATIVE DAVIES pointed out that he did not read the
"RESOLVE" in HCR 10 as Representative Porter did; it states that
the request for proposals for the sale of the power projects is
open to the electric utilities in the communities. It does not say
that it is open only to them; therefore, a third party could
respond to the RFP.
CHAIRMAN HUDSON said that is why the question of whether or not
they have the first right of refusal came up.
REPRESENTATIVE ROKEBERG stated that it should be clear in HCR 10
whether it does or does not.
Number 0742
MR. EVANS indicated that the Four Dam Pool communities want HCR 10
to reflect that they are the sole purchasers of these projects.
REPRESENTATIVE PORTER made a motion to adopt a conceptual
amendment, "on line 5, page 2, after the word 'open' you would say
'only'."
REPRESENTATIVE DAVIES wondered, if it is open only to the electric
utilities in the communities, then why would a RFP be used. He
asked isn't it then a negotiated sale? He said maybe the line
should read, "divest itself of its interest in the Four Dam Pool
power projects - preparing a request for proposals for the sale, by
negotiating a sale of the power projects to those utilities."
REPRESENTATIVE BERKOWITZ wondered if it would only be the utilities
themselves that could make the purchase; the communities themselves
would be precluded from doing so.
Number 0610
REPRESENTATIVE AUSTERMAN explained that the issue of whether a
consortium of all the Four Dam Pools buy them or a consortium of
two of them or if they individually buy them could produce three
different RFPs.
REPRESENTATIVE BERKOWITZ stated that the language presently in HCR
10 would necessitate that the utility would make the bid and
ultimately the purchase. There might be a different mechanism that
the community would want to employ rather than the direct sale to
the utility itself.
REPRESENTATIVE PORTER said that even though some of the utilities
are owned by municipalities and some are cooperative, they're made
of the same ingredients.
REPRESENTATIVE GREEN expressed his concern with regards to output,
gigawatts per year, because on line 8 of HCR 10 it states, "the
state receives a fair market value for the power projects." What
if, for example, the smallest project, Solomon Gulch, had an
accounting process that tells the state what would be a good price
and they find out it is 1.5 times the best possible bid. He
wondered if it would kill the whole deal or if everyone in the
group would agree on buying three and leaving one to the state.
REPRESENTATIVE AUSTERMAN stated that the power sales agreement
would preclude that from happening, because they all have to agree.
REPRESENTATIVE GREEN interjected that they might all agree, but
they might not want to come up with that kind of money; therefore,
they might agree on three being sold, but also agree that one is
priced too high.
Number 0385
REPRESENTATIVE AUSTERMAN said that if that were the case there
would not be agreement among all of them.
REPRESENTATIVE BERKOWITZ pointed out that HCR 10 is not suppose to
dictate the terms of the sale, but just ask that some steps be
taken to move towards a sale.
MR. EVANS agreed. He said that HCR 10 is simply asking the AEA to
come to the table and come up with a price.
REPRESENTATIVE ROKEBERG requested clarification on whether the AEA
had been instructed that an appraisal be done to determine fair
market value.
MR. EVANS indicated that a study has already been done on risk
assessment. There are probably many approaches or concepts by
which to come to some kind of evaluation. He expects that the AEA
and the communities, during the interim, will attempt to find some
basis that is acceptable to the legislature.
REPRESENTATIVE ROKEBERG pointed out that the term, "fair market
value," implies that some type of appraisal would be done. He
wondered if the mechanism should be implicit or explicit in the
resolution.
REPRESENTATIVE AUSTERMAN responded that the AEA has the
responsibility and he has no doubt that they will do what they are
required to do with regards to do-diligence.
REPRESENTATIVE ROKEBERG wondered if there should be legislative
approval of any transaction.
MR. EVANS explained that when negotiations began a couple of years
ago the Governor's office issued a letter and set up certain
standards before any approval of a sale could happen. The most
important one was there would be no sale short of legislative
approval.
Number 0059
CHAIRMAN HUDSON asked if there was any objection to the proposed
amendment, "on line 5, page 2, after the word 'open' you would say
'only'." There being no objection, the amendment was adopted.
Number 0005
REPRESENTATIVE PORTER made a motion to move CSHCR 10 (URS) out of
committee with individual recommendation. There being no
objection, CSHCR 10 (URS) moved from the House Special Committee on
Utility Restructuring.
HB 174 - ELECTRIC COOPERATIVE EMPLOYMENT CONTRACT
TAPE 99-20, SIDE A
CHAIRMAN HUDSON announced that the next order of business was House
Bill No. 174, "An Act relating to personal services contracts for
certain employees of electric cooperatives."
EDWARD BURKE, Legislative Administrative Assistant for
Representative Sanders, Alaska State Legislature, read the sponsor
statement into the record:
Good public policy dictates that those who are elected by the
constituency have the right and the responsibility to
implement their own perspective and agenda on the operational
management of the organization they were elected to by
selecting and hiring paid staff of their own chosing. This
holds true with the President of the United States, the
Governor, and on down through the ranks of municipal forms of
government. In each case the elected executives are granted
the authority to select staff they have confidence will
implement the agenda favored by the elected official.
When first organized under the Rural Electric Association
[REA], Alaska Cooperatives were beholden to this policy by a
mandate from REA that dictated no General Manager's contract
should exceed three years, the typical term of the elected
boards of director of cooperatives. Since the abolition of
REA, there is no official policy on the records to reinforce
this traditional limit on cooperative executives' contracts.
Indeed, since the demise of REA, we have seen the
implementation of at least one utility cooperative General
Manager contract that essentially grants a perpetual term
through a unique automatic renewal clause that requires the
Board to take affirmative action to negate the automatic
renewal of the contract for another year on a five year term.
In the case cited above, if a new board of directors wished to
terminate the current General Manager's contract, they could
find themselves obligated to in effect buy-out the remainder
of the term of the contract. With current utility managers
salaries and benefit packages reaching the $200,000 a year
level, this could mean up to one million dollars, a figure
most rural electric cooperatives would find staggering.
Number 0360
REPRESENTATIVE ROKEBERG asked who is supporting HB 174.
MR. BURKE indicated that it was done by request.
REPRESENTATIVE ROKEBERG asked who requested it.
Number 0385
MR. BURKE stated that the lobbyist Mich Gravvo(ph) talked to his
boss and requested the bill.
REPRESENTATIVE ROKEBERG asked if Mr. Burke knew for who the bill
was requested.
MR. BURKE replied no.
REPRESENTATIVE PORTER indicated that they may want to take a look
at the wording, because it may not be precluding what it is
desiring to preclude. It just states that the term of a contract
may not exceed 12 months.
MR. BURKE stated that he believes the situation currently is that
a general manager can be extended if the board does nothing. HB
174 would limit that, so the board could only do nothing one time,
which would extend that contract for one year. After that, HB 174
would force them to send it back to the members of the cooperative
to vote on that person.
REPRESENTATIVE PORTER said that he doesn't doubt that is the
intent, but he is concerned about the wording accomplishing that
intent.
Number 0540
MR. YOULD stated that they are unanimously against the bill. They
feel that it is regressive, it does not give boards of directors
the ability to attract good management to their utilities and it
imports a level of micro-management. He indicated that when a
contract runs out, it runs out. That general management no longer
has an obligation to serve that utility, nor does a utility have an
obligation to that general manager. He has not seen contracts for
general managers that automatically re-up if the board of directors
does not take an affirmative action. Also there was an allusion to
the fact that the REA no longer requires contracts limited to 36
months, and it is true that they do no longer require that, because
they stepped out of the business of trying to micro-manage general
contracts. He added that as a general bill it is best left up to
the local boards of directors to take care of, and in the event
they are not acting well on behalf of their constituents they are
subject to recall or a revote.
ADJOURNMENT
CHAIRMAN HUDSON adjourned the House Special Committee on Utility
Restructuring at 9:50 a.m.
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