Legislature(1999 - 2000)
03/29/2000 08:02 AM House URS
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON UTILITY RESTRUCTURING
March 29, 2000
8:02 a.m.
MEMBERS PRESENT
Representative Bill Hudson, Chairman
Representative John Cowdery, Vice Chairman
Representative Brian Porter
Representative John Davies
Representative Ethan Berkowitz
Representative Joe Green (alternate)
MEMBERS ABSENT
Representative Pete Kott
Representative Norman Rokeberg
COMMITTEE CALENDAR
HOUSE BILL NO. 169
"An Act relating to including the costs of expansion activities
and political activities in rates of electric cooperatives."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 169
SHORT TITLE:ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY
SPONSOR(S): REPRESENTATIVE(S)GREEN
Jrn-Date Jrn-Page Action
03/31/99 0625 (H) READ THE FIRST TIME -
REFERRAL(S)
03/31/99 0625 (H) URS, L&C
04/28/99 (H) URS AT 8:00 AM CAPITOL 120
04/28/99 (H) SCHEDULED BUT NOT HEARD
05/05/99 (H) URS AT 8:00 AM CAPITOL 120
05/05/99 (H) SCHEDULED BUT NOT HEARD
03/15/00 (H) URS AT 8:00 AM CAPITOL 120
03/22/00 (H) URS AT 8:00 AM CAPITOL 120
03/22/00 (H) Heard & Held
03/22/00 (H) MINUTE(URS)
03/29/00 (H) URS AT 8:00 AM CAPITOL 124
WITNESS REGISTER
ERIC YOULD, Executive Director
Alaska Rural Electric Cooperative Association
703 West Tudor
Anchorage, Alaska 99503
POSITION STATEMENT: Testified on HB 169.
JEFF LOGAN, Staff
to Representative Joe Green
Alaska State Legislature
Capitol Building, Room 214
Juneau, Alaska 99801
POSITION STATEMENT: Presented information regarding HB 169.
ACTION NARRATIVE
TAPE 00-7, SIDE A
Number 0037
CHAIRMAN BILL HUDSON called the House Special Committee on
Utility Restructuring meeting to order at 8:02 a.m. Members
present at the call to order were Representatives Hudson,
Cowdery, Porter, and Green. Representatives Davies and
Berkowitz arrived as the meeting was in progress.
HB 169 - ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY
Number 0199
CHAIRMAN HUDSON announced the first order of business would be
HOUSE BILL NO. 169, "An Act relating to including the costs of
expansion activities and political activities in rates of
electric cooperatives." [The committee had heard the opening
presentation and some testimony at the previous meeting.]
Number 0317
ERIC YOULD, Executive Director, Alaska Rural Electric
Cooperative Association (ARECA), the trade association for the
electric utility industry in the state, came forward to testify.
He noted that the state's electric utility industry is made up
of about 70 percent electric cooperatives, 20 percent municipal
utilities, and 10 percent investor-owned utilities. The
cooperatives have done a good job in providing reliable and
affordable electricity to Alaska citizens, he said.
Nevertheless, he believes that HB 169 appears to be a little bit
vindictive toward the industry and attempts to curtail its
activities. Specifically, it tries to preclude expenditures for
activities related to expansion and political action.
MR. YOULD pointed out that political activities already are
essentially controlled by both the Alaska Public Offices
Commission (APOC) and the Regulatory Commission of Alaska (RCA).
Expenditures for political activities are not being put into
people's rate base, he stated. He strongly suggested that
rather than having it be redundant in law, the committee should
delete subsection (I) [dealing with political activity] from
Section 1.
Number 0481
MR. YOULD said it is of greater concern to the industry that HB
169 is precluding expansion activities. He stated that doing so
would hurt cooperatives throughout the state, cooperatives which
have provided good service that was not brought by the private
sector. He quoted from the bill's definition of expansion
activities, "an activity that is intended to attract customers
to an electric cooperative who, at the time of the activity, are
customers of another electric utility." He said this is aimed
strictly at cooperatives, not at municipal or investor-owned
utilities. ARECA has unanimously adopted a resolution opposing
HB 169. The group thinks that if Alaska is going into some form
of competition in the future, "it should not be done with a
cocked hat."
MR. YOULD explained that cooperatives are allowed to get into
other business ventures of like value or of like nature to the
electric utility industry. For example, ARECA's largest member
utility is in the Internet business. Some members are looking
into entering the satellite television business to bring in
satellite television with small dishes that otherwise could not
come to the state. Still others are considering going into home
security systems or two-way radio communication systems. All of
these activities involve one utility venturing into another
utility's service area and seeking members. The definition he
had quoted appears to restrict those activities. "I think there
needs to be a very strong rewriting of this particular
definition if this particular bill is to go forward," he said,
[assuming that] the intent is to restrict one co-op from taking
over another co-op, which he thinks was the original intent.
Number 0686
MR. YOULD said he has major questions about how the bill would
work. Ostensibly, a cooperative gets a vote of its membership
concerning which of them are willing to allow a portion of their
rates to go toward advertising and expansion activities. He
wondered what happens if one utility surreptitiously gets 75
percent of its voters to agree to taking over a second utility,
thereby acquiring "a pretty large war chest." When the second
utility realizes what is happening, suppose that it goes out and
tries to get a vote of its people but only comes up with 15
percent to ward off the first utility. The result is an unequal
attempt to consolidate. That is not to say that consolidation
is wrong, but the playing field is not equal.
MR. YOULD strongly recommended that HB 169 be examined much more
closely. He suggested that before the committee takes action on
this bill, it consider where it fits in with electric utility
restructuring, the very issue that this committee is charged
with addressing.
Number 0799
REPRESENTATIVE GREEN asked Mr. Yould whether he read that "as
prohibiting or just conditionally?"
MR. YOULD said he reads it as conditionally; however, he thinks
there is an effective barring. "It is so difficult to go out
and get the members to vote to allow an expansion activity that
you have effectively precluded the utility from doing that," he
said. He asked how legislators would feel if every time they
wanted to make an appropriation to any state program, they had
to get a vote of the people to do so, and even then could only
do it on a pro-rata basis according to how that vote came out.
REPRESENTATIVE GREEN said that was exactly what the legislature
did last September [putting before the public the question of
tapping the Permanent Fund to help pay for state government].
An issue as large as taking over another utility is not an
everyday activity. Only on major issues would a utility be
required to secure the informed consent of the people who own
the utility.
MR. YOULD said he understood that to be the intent, but he does
not think the wording of the bill is restrictive enough to that
intent.
Number 0909
CHAIRMAN HUDSON asked Mr. Yould to specify the areas of the bill
that he thinks need rewording.
MR. YOULD cited the definition of expansion activities on page
2, line 23, saying it is "extremely broad" and seems to preclude
any type of business expansion activity that would attract a
customer from another utility. He then cited page 2, line 7,
subsection (I), saying the whole discussion on political
activities and contributions to political activities is
redundant, already being covered by both APOC and RCA.
Number 1000
REPRESENTATIVE PORTER asked whether political contributions now
are precluded by statute.
MR. YOULD affirmed that. In response to a follow-up question
from Representative Porter, Mr. Yould said he did not think HB
163 would allow them under certain circumstances.
Number 1075
CHAIRMAN HUDSON noted that the committee is a policy committee,
and its purpose in looking over HB 169 is to determine whether
the concept is right.
REPRESENTATIVE GREEN noted that the large costs incurred in
"this recent tiff between the two co-ops," have to be paid from
somewhere. Although those costs technically may not be in their
rate base, the ratepayers ultimately end up paying for it. They
should have the right to say, "This is not in your core
function" [or to endorse a management proposal to expand]
REPRESENTATIVE PORTER said he is still concerned about HB 169 in
relation to political activity. If the law currently precludes
political activity, the way he reads page 2, line 11, it allows
political activity under certain circumstances. He read: "An
electric cooperative may only include a charge for political
activity in a rate if the cooperative ... [meets the
qualifications thereafter specified]." He said he is concerned
that this portion of HB 169 provides a method for getting into
political activity, and he does not think that is the intent of
this legislation.
Number 1288
JEFF LOGAN, Staff to Representative Green, Alaska State
Legislature, clarified that the language in HB 169 only relates
to the rate monies. It does not preclude any political
activities from the margin monies. That is an important
distinction.
REPRESENTATIVE GREEN asked whether the committee members were
familiar with margins and base rates.
MR. LOGAN explained that the utility commission allows the
cooperatives to extract a cost from their members above the cost
of providing the electrical service, "a profit, if you will."
But because a cooperative is a not-for-profit organization,
those monies are called margins. They go into a separate
account.
REPRESENTATIVE GREEN added that those monies are to be repaid to
the members if there is not some other base-core need that
arises unexpectedly. He explained that a utility needs to have
some funds available to meet costs beyond the budget. When
those "rainy day" funds are sufficient, they are returned to the
members.
Number 1383
REPRESENTATIVE BERKOWITZ noted that HB 169 appears to be
somewhat contentious. He wondered if the bill could be set
aside to proceed with the scheduled joint meeting with the House
Community and Regional Affairs Standing Committee. He said he
was concerned that there could be protracted discussion, and
that there may be serious problems with the bill.
[Several other committee members voiced concurrence.]
REPRESENTATIVE GREEN said it sounded as if half of the committee
thought there should be more discussion on HB 169. He suggested
it would a good idea to hold it over.
CHAIRMAN HUDSON moved HB 169 to the bottom of the calendar,
saying that it could be discussed if there was sufficient time
after the joint committee meeting on power cost equalization.
[The remaining time proved to be insufficient, so HB 169 was
held over.]
[Note: At 8:40 a.m., Chairman Hudson announced the beginning of
the joint meeting with the House Community & Regional Affairs
Standing Committee and passed the gavel to that committee's
chair, Chairman Morgan. A separate set of minutes is available
for that meeting.]
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