Legislature(1999 - 2000)
04/12/2000 09:12 AM House URS
| Audio | Topic |
|---|
* 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 12, 2000
9:12 a.m.
MEMBERS PRESENT
Representative Bill Hudson, Chairman
Representative John Cowdery, Vice Chairman
Representative Pete Kott
Representative Norman Rokeberg
Representative Joe Green (alternate)
MEMBERS ABSENT
Representative Brian Porter
Representative John Davies
Representative Ethan Berkowitz
COMMITTEE CALENDAR
HOUSE BILL NO. 169
"An Act relating to including the costs of expansion activities
and political activities in rates of electric cooperatives."
- MOVED CSHB 169(URS) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: HB 169
SHORT TITLE: ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY
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
4/28/99 (H) SCHEDULED BUT NOT HEARD
5/05/99 (H) URS AT 8:00 AM CAPITOL 120
5/05/99 (H) SCHEDULED BUT NOT HEARD
3/15/00 (H) URS AT 8:00 AM CAPITOL 120
3/15/00 (H) -- Meeting Postponed to 3/22 --
3/22/00 (H) URS AT 8:00 AM CAPITOL 120
3/22/00 (H) Heard & Held
3/22/00 (H) MINUTE(URS)
3/29/00 (H) URS AT 8:00 AM CAPITOL 124
3/29/00 (H) Heard & Held
3/29/00 (H) MINUTE(URS)
3/31/00 (H) L&C AT 3:15 PM CAPITOL 17
3/31/00 (H) <Pending Referral>
4/05/00 (H) URS AT 8:00 AM CAPITOL 120
4/05/00 (H) <Bill Postponed To 4/12>
4/12/00 (H) URS AT 9:00 AM CAPITOL 120
WITNESS REGISTER
NANETTE THOMPSON, Commissioner/Chair
Regulatory Commission of Alaska
Department of Community and Economic Development
1016 West Sixth Avenue
Anchorage, Alaska 99501-1963
POSITION STATEMENT: Testified on HB 169.
ACTION NARRATIVE
TAPE 00-8, SIDE A
Number 0001
CHAIRMAN BILL HUDSON called the House Special Committee on
Utility Restructuring meeting to order at 9:12 a.m. Members
present at the call to order were Representatives Hudson,
Cowdery, Kott, Green and Rokeberg.
HB 169-ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY
Number 0064
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 bill had been presented at the
committee's March 22 meeting, and testimony was heard on March
29.]
Number 0093
REPRESENTATIVE GREEN, sponsor of HB 169, explained that the
thrust of the bill is to ensure that cooperatives do not misuse
funds in political or other non-essential business. Because co-
ops are charged with providing the most reliable, lowest-cost
energy, it seems to him a misuse of funds for them to get into
advertising wars and major media [campaigns]. He pointed out
that Chugach [Electric Association, Inc.] had expended nearly
$800,000 - and he doesn't even know how much MEA [Matanuska
Electric Association] expended - in a hostile takeover attempt in
1998. That is what prompted this bill. The intent is to try to
ensure that the existing laws are upheld and that expenditures
made by a regulated agency are reviewed on behalf of the
ratepayers.
Number 0261
VICE CHAIRMAN COWDERY asked whether it would be a correct analogy
to say that it [the utilities' use of funds] would be very
similar to the legislature's taking general fund money to get
members re-elected or others defeated.
Number 0299
REPRESENTATIVE GREEN said a better analogy might be if those
funds were used to be persuasive to a political party. He added,
"That is the amendment we are going to make, Mr. Chairman. There
is a reference to candidates, and we're going to strike that."
He introduced Amendment 1 [1-LS0766\D.2, Cramer, 4/11/00], which
he said had been drafted in response to Representative Porter's
concern. It read:
Page 2, line 28:
Delete "or for a candidate"
Page 2, line 29:
Delete all material.
Reletter the following subparagraph accordingly.
Number 0435
REPRESENTATIVE GREEN moved to adopt Amendment 1. There being no
objection, it was so ordered. He indicated that he might have a
conceptual amendment after the committee heard from Ms. Thompson.
Number 0468
NANETTE THOMPSON, Commissioner/Chair, Regulatory Commission of
Alaska (RCA), Department of Community and Economic Development,
testified by teleconference from Anchorage. She confirmed that
she had heard and understood Amendment 1.
CHAIRMAN HUDSON asked her to comment about the bill and the
substance of it, as amended.
Number 0483
MS. THOMPSON said she does not disagree at all with the intent of
the bill, but she does not think it is necessary because of the
existing statute. Right now in AS 42.05.381, the costs of
political contributions or public relations expenses, except for
some limited exceptions, are not allowed in rates. That being
the case, she surmised that the committee would want to know why
the contrary appears true. She said it is important to
understand the distinction between the rate-setting procedures
now in use and what the bill proposes. She explained:
The bill here talks about asking for customers'
permission before a particular expense is incurred by
the utility. The way utility rate making is
structured, the utility has to get approval from the
RCA for a specific rate; they have to prove that all
the costs that go into making that rate are allowable.
We see [that] in the context of requests from a utility
for tariff changes or a major rate increase. They
can't do it until we approve it. Sometimes we approve
it, if it is relatively minor. ... If we don't have
enough information, we suspend it and do an
investigation. We sometimes have a hearing, require
further financial filings. But this issue of political
contributions is one that arises in the context of rate
cases.
Number 0613
MS. THOMPSON recalled her earlier testimony that the Alaska
Public Utilities Commission [predecessor to the RCA] had not been
doing a lot of rate cases, so the rates that utilities were
charging had not been reviewed, as a whole, for some time. She
said the RCA has scheduled rate cases for all of the major
electric utilities this year, and the issue of political
contributions or campaigns is an issue in at least two cases that
are now pending. She elaborated:
What happens after we approve a rate is, basically, the
utility is allowed to charge according to those costs.
We only allow them what costs are directly related to
generating electricity or delivering phone service or
whatever it is. If they decide to spend additional
monies, we don't always necessarily always know where
that's coming from. Presumably, if it [the utility] is
privately held, it's stockholder dividends. But we do
look at this issue in the context of a rate case. They
don't have to get permission from us if they're
charging approved rates; they don't have to come back
for permission again about where those costs come from.
What we approve is the final rate, after doing a
detailed review of all the components, and we're in the
process of doing that. ...
The basic answer is that it's an issue that we are
concerned about. We are looking at it. We look at it
in the [context] of overall rates. The current law
does require us to exclude those expenses, and we do.
That's what the case law is from the previous
commission as well as decisions from this commission.
Number 0754
MS. THOMPSON explained that the difference between HB 169 and
current law is that the bill suggests that the utility would have
to get pre-approval from its members about this type of
expenditure. She said her only concern about that is that it
"kind of opens the door to review of a lot of different specific
rate issues and it might be difficult to define expansion
activities." She added that this is something that the utility
might be able to find a way around easily enough.
Number 0786
REPRESENTATIVE GREEN referred to an e-mail from [Ms. Thompson] to
the chairman and commented, "That was just really great. It
seems like ...[the RCA is addressing] at least one of the
concerns that I've had now [that] you have indicated that you are
going to be very active in this field." He asked whether the RCA
was going to be taking any retroactive action.
MS. THOMPSON replied that when a utility requests a rate change,
the RCA suspends that [increase in the rate] during the time it
is reviewing the requests. The RCA's decision is retroactive to
the date when the change was requested. However, beyond that the
courts say basically that [the RCA] as an agency cannot make
retroactive adjustments.
Number 0871
REPRESENTATIVE GREEN asked whether the "million-plus" that has
been expended would just end up somehow in the rate that the
members paid.
MS. THOMPSON said she can check on that particular utility if he
wants to know the suspension date. She asked if the "million-
plus" was in reference to a particular utility.
Number 0899
REPRESENTATIVE GREEN said there were two utilities involved:
Matanuska Electric Association and Chugach Electric Association.
He added:
The concern I have is that it [RCA action] won't help
those of us who have been rate paying on what I think
are extravagant expenses that I had no choice about
making. I joined a utility .... The two things that I
kept looking for were dependable power and the lowest
possible cost.
Number 0973
MS. THOMPSON said she appreciated his concerns and would be happy
to provide him with the suspension dates for those two utilities.
Number 0992
REPRESENTATIVE ROKEBERG asked if he understood correctly from
prior testimony that cooperatives could expend certain moneys
[other than rates], and that would not be prohibited.
MS. THOMPSON answered that if membership equity is analogous to
stockholder's equity, the answer is "maybe." She said she could
not give a definite answer because it has to do with the way the
co-op is legally structured.
[REPRESENTATIVE ROKEBERG and REPRESENTATIVE GREEN briefly
discussed the concepts of "margin" and "retained earnings."
General discussion related to those topics followed.]
Number 1129
REPRESENTATIVE ROKEBERG said he still had a concern about whether
expansion and public relations expenses can be paid out of margin
moneys that are not part of the tariff or rate filings that the
RCA would review.
MS. THOMPSON said it was a question of interpreting the law under
which the cooperative is organized. That is where to look
regarding their ability to do that. She said she thinks
cooperatives are organized under a federal law. The
cooperatives' margin money is analogous to shareholders' equity
in the private sector, and the RCA does not tell the co-ops how
to spend their shareholders' equity. They are responsible to
their shareholders [regarding that].
Number 1194
REPRESENTATIVE GREEN noted that AS 42.05.381 states that a public
utility rate may not include an allowance for costs of political
contributions or public relations except for reasonable amounts
spent for energy conservation efforts, public information
designed to promote more efficient use of the utilities
facilities, informing shareholders and members of a cooperative
meeting, and emergency situations. He said he did not see any of
those four exceptions justifying the expenditures that were made
"on this war of newspapers and media blitz."
Number 1248
REPRESENTATIVE ROKEBERG theorized that better utilizing
facilities might include expansion into a different market area
if the utility had excess capacity.
REPRESENTATIVE GREEN said that was not the case in the situation
with which he had concern.
Number 1270
CHAIRMAN HUDSON addressed Ms. Thompson, saying:
It looks like you and the majority leader agree on the
role that you have. If I understand correctly from
your testimony, you believe that you already have
sufficient language in the law and guidance in order to
assume that responsibility, but that nothing in
Representative Green's bill would preclude you from
essentially doing what you already have the power to
do; is that correct? You could live with the bill; is
that correct?
Number 1304
MS. THOMPSON said she is in agreement with the philosophy, the
purpose of the bill, but thinks if the bill is passed, "it might
create some confusion if some expenses had to be pre-approved by
members and others were looked at in another context by us [the
RCA]. She said by the time the legislature reconvenes next year,
the RCA will have been through these rate cases, and she can then
provide some specific examples that might be helpful to better
understand the context in which it comes up and the consequences.
Number 1385
REPRESENTATIVE ROKEBERG asked Ms. Thompson if she had indicated
that she had concern about the definition of expansion.
MS. THOMPSON said she finds it confusing. Unclear language can
lead to varying interpretations, argument and litigation over
whether one is in compliance with the law.
Number 1409
REPRESENTATIVE ROKEBERG suggested it might be appropriate to
draft an explicit definition of what expansion means because
there have been concerns expressed by ARECA [Alaska Rural
Electric Cooperative Association].
MS. THOMPSON said that would be helpful to the RCA.
Number 1471
CHAIRMAN HUDSON said he does not want to hold up this bill
because of the late date in the session. He added, "This is an
important issue, and I think even having this meeting today has
been very constructive." It identified a concern, he said, and
the committee and the RCA are nearing a cooperative resolution.
He asked Ms. Thompson to have the RCA review the bill and make
specific suggestions for improving it. Then, even if the bill
does not pass, the record would be established regarding what
this committee and the RCA believe are the responsible actions to
take.
MS. THOMPSON said she would be happy to do so.
Number 1533
REPRESENTATIVE ROKEBERG asked Ms. Thompson to look also at AS
32.05.381 to see if modifying that particular statute might be
another way to address some of the concerns brought up in the
bill.
Number 1564
REPRESENTATIVE GREEN observed that the concept [of the bill] was
germinated when there was a different commission and perhaps a
different [level of] enthusiasm. He offered a conceptual
amendment to add a "sunset" clause so that if [the legislature]
finds that, yes, the new commission is doing what it is already
is charged to do, then this would go away, but it would add some
impetus to be sure that it is done. He suggested a sunset date
of December 31, 2002. He also indicated it could be added in the
next committee.
Number 1636
CHAIRMAN HUDSON remarked, "We appear now to have a new RCA that
is very professional, highly skilled, and a bunch of hard-working
folks over there; I'm really quite pleased with them." He said a
sunset clause could be addressed in the next committee of
referral with a specific amendment. He suggested that the
current committee had amended the bill well and established a
policy concern, and that it was proper to send the legislation
forward.
Number 1681
REPRESENTATIVE COWDERY made a motion to move HB 169, as amended,
out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, CSHB
169(URS) was moved from the House Special Committee on Utility
Restructuring.
CHAIRMAN HUDSON noted that this could be the last meeting of the
House Special Committee on Utility Restructuring.
REPRESENTATIVE ROKEBERG thanked Chairman Hudson for his
leadership of the committee for the past two years and taking a
lot of work off his own shoulders [as chairman of the House Labor
and Commerce Standing Committee]. He expressed appreciation for
"the work this committee has done in looking at issues that have
far-reaching, long-term effects on the future of the state in
terms of delivering utility services to the citizens on a more
affordable basis.
Number 1730
CHAIRMAN HUDSON advised members that his staff was drafting a
letter speaking to the culmination of the committee's efforts.
He invited them as individuals to "sign off on" its conclusions
and recommendations.
[An informal conversation regarding shallow gas deposits ensued.]
Number 1833
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Utility Restructuring meeting was adjourned
at 10:45 a.m.
| Document Name | Date/Time | Subjects |
|---|