Legislature(2017 - 2018)SENATE FINANCE 532
02/26/2018 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB195 | |
| HB120 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 195 | TELECONFERENCED | |
| + | HB 120 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
February 26, 2018
9:02 a.m.
9:02:38 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:02 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Peter Micciche
Senator Donny Olson
Senator Gary Stevens
Senator Natasha von Imhof
MEMBERS ABSENT
None
ALSO PRESENT
Lori Wing-Heier, Director, Division of Insurance,
Department of Commerce, Community and Economic Development;
John Ptacin, Chief Assistant Attorney General, Regulatory
Affairs and Public Advocacy, Department of Law.
SUMMARY
HB 120 DEPT OF LAW: ADVOCACY BEFORE FERC
HB 120 was HEARD and HELD in committee for
further consideration.
HB 195 INSURER'S USE OF CREDIT HISTORY/SCORES
HB 195 was REPORTED out of committee with a "do
pass" recommendation and with one new zero fiscal
note from Department of Commerce, Community and
Economic Development.
HOUSE BILL NO. 195
"An Act relating to insurer actions based on credit
history and insurance scores at insurance policy
renewal; and providing for insurer consideration of
consumer requests for exceptions of credit history or
insurance scores."
9:03:29 AM
Co-Chair MacKinnon directed attention to HB 195. She
relayed that the bill had been heard in committee on the
previous Wednesday and heard public testimony.
LORI WING-HEIER, DIRECTOR, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT,
stated that HB 195 amended credit scoring, which was
currently allowed in the state on new business for personal
lines for auto and homeowners. She stated that it did not
impact life insurance, health insurance, or commercial
lines. The bills allowed credit scoring to be used on the
renewal and new business. It allowed for the insurer to
provide to the consumer with written notice, when credit
scoring was used, and whether an adverse action was found
that would be detrimental to the consumer. At that point,
the insurer must tell the consumer that there was a right
for an appeal. The appeal would go for extraordinary life
circumstances, which were spelled out in the bill. The
consumer would appeal to the insurance company first, and
the second appeal would come to the Division of Insurance
for adjudication.
Senator Olson wondered why the amendment was not included
in the original credit score bill.
Ms. Wing-Heier replied that the bill allowed for the
insurance company to be the final adjudicator of the
appeal. It did not allow extraordinary circumstances to
include the provision related to a prudent person. The
governor did not feel that the consumer protections were
broad enough, so he vetoed the bill, and reintroduced it in
2017. She did not know why the drafters did not include the
broader protections in 2016.
9:06:25 AM
Co-Chair MacKinnon referenced a question from public
testimony on February 21, 2017 that concerned the
definition of a "new applicant." She wanted to ensure that
all applicants could use their credit score to help reduce
their premium.
Ms. Wing-Heier replied that the Division of Insurance would
not mandate that insurance companies use credit scoring.
Rather, if the company elected to use credit scoring, they
would use it on new business and renewal. She remarked that
Geico did not currently use credit scoring.
Co-Chair MacKinnon asserted that the renewal would be
included.
Ms. Wing-Heier answered in the affirmative.
Senator Stevens wondered whether there was proof that a
person with a low credit rating was more likely to have
accidents.
Ms. Wing-Heier replied that the statistics from the
National Association of Insurance Commissioners (NAIC) and
other organizations showed a correlation to credit period,
and the actions an individual would take, such as
maintaining their house, good health, and driving record.
The credit score would become a part of the insurance
score.
Co-Chair MacKinnon asked Ms. Wing-Heier to discuss the
issue of families with no credit.
Ms. Wing-Heier stated that if an individual had no credit,
the individual would not be penalized.
Senator Olson had a hard time drawing a distinction between
not being put into a higher category.
Ms. Wing-Heier stated that if the insurers could not
determine a credit score, an induvial would not be in a
preferred program.
Co-Chair MacKinnon relayed that the original bill had
passed with overwhelming support before it was vetoed by
the governor.
Vice-Chair Bishop discussed FN1 from the Department of
Commerce, Community and Economic Development. He relayed
that the committee had covered the fiscal note.
Vice-Chair Bishop MOVED to report HB 195 out of Committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
HB 195 was REPORTED out of committee with a "do pass"
recommendation and with one new zero fiscal note from
Department of Commerce, Community and Economic Development.
9:12:39 AM
AT EASE
9:17:38 AM
RECONVENED
HOUSE BILL NO. 120
"An Act relating to the Department of Law public
advocacy function to participate in matters that come
before the Federal Energy Regulatory Commission."
9:17:38 AM
Co-Chair MacKinnon directed attention to Tlingit Culture,
Language, and Literacy (TCLL) Program from Harborview
Elementary School in attendance in the audience.
JOHN PTACIN, CHIEF ASSISTANT ATTORNEY GENERAL, REGULATORY
AFFAIRS AND PUBLIC ADVOCACY, DEPARTMENT OF LAW, relayed
that the bill would allow the Department of Law (LAW) to
recover costs related to cases in the Federal Energy
Regulatory Commission (FERC).
Mr. Ptacin discussed the presentation "HB 120: REGULATORY
COST CHARGE FOR FERC MATTERS" (copy on file).
Mr. Ptacin looked at slide 2, "What is the regulatory cost
charge (RCC)?":
• The RCC is a fee assessed on public utilities and
pipelines that are regulated by the Regulatory
Commission of Alaska (RCA).
• It is created by AS 42.05.254 (for utilities) and AS
42.06.286 (for pipelines).
Mr. Ptacin turned to slide 3, "Who Pays RCCs?":
• Utilities and pipelines that are regulated by the
RCA pay RCCs, including:
o over 125 public utilities and about 20
common carrier pipelines with in-state
deliveries.
Those utilities and pipelines may pass the charge onto
customers that benefit from RCA regulation.
Each year, the RCA assesses RCCs to utilities and
pipelines based on the amount of work required for
each industry sector.
Co-Chair Hoffman asked about the annual revenues.
Mr. Ptacin showed slide 4, "What does the RCC pay for?":
The money collected in the RCC provides funding for:
• the Regulatory Commission of Alaska (RCA), which
is responsible for the economic regulation of
public utilities and intrastate common carrier
pipelines in Alaska, and
• the Regulatory Affairs and Public Advocacy (RAPA)
section in the Department of Law, which is
charged with advocating for the public interest
in matters related to the economic regulation of
public utilities and pipelines.
9:21:22 AM
Mr. Ptacin reviewed slide 5, "What does the RCC pay for?":
Just and reasonable rates for utility and pipeline
customers.
Senator von Imhof referenced slide 5, and asked if there
were any utilities in the state that were not regulated by
the Regulatory Commission of Alaska (Regulatory Commission
of Alaska).
Mr. Ptacin relayed that it was possible for utilities to
petition the Regulatory Commission of Alaska, and have a
vote to not be regulated at a point. He stated that Nome
Joint Utility System decided against regulation.
Senator von Imhof wondered whether the unregulated
companies had publicly available financials.
Mr. Ptacin was not aware if the financial information of
unregulated utilities was available.
Co-Chair MacKinnon informed that there were multiple
utilities that were not regulated. She thought there was a
statewide issue. She discussed differing utility costs and
aging infrastructure. She had been working on reducing
energy costs over the previous interim, and had experienced
a challenge obtaining information. As the state invested in
energy efficiency, it had not been able to gain cost
savings because of fixed costs and a small population base.
Senator von Imhof referenced legislation to extend the
bonding authority for the Fairbanks Interior Gas Project.
She stated that there had been a hearing after the purchase
of the Fairbanks Natural Gas Company for $54 million. She
stated that it was an unregulated utility at the time, but
had since received applied regulation.
9:25:17 AM
Mr. Ptacin discussed slide 6, "How Much Is It?":
• Total RCCs cannot exceed 0.87 percent of the
adjusted gross revenue (revenue derived from
operations in Alaska) of the regulated utilities and
pipelines.
• Statute allocates that 0.87 percent between the RCA
and RAPA.
• RCCs funding the RCA cannot exceed 0.70 percent
• RCCs funding RAPA cannot exceed 0.17 percent
Co-Chair MacKinnon asked if the RCC funded the Regulatory
Commission of Alaska.
Mr. Ptacin answered in the affirmative.
Co-Chair MacKinnon wondered whether the rate was explicit
in state statute.
Mr. Ptacin answered in the affirmative.
Co-Chair MacKinnon wondered whether it was as explicit as
how the funding was separated.
Mr. Ptacin answered in the affirmative.
Senator Stevens wondered whether the 0.87 percent paid for
all the expenses of the Regulatory Commission of Alaska.
Mr. Ptacin replied in the affirmative.
Mr. Ptacin referenced slide 7, "RAPA's 2017 Budget":
• 0.17 percent Statutory Cap = $2,374,390
• RAPA's 2017 Budget = $2,333,700
• Budget is $40,690 under the cap
Mr. Ptacin moved to slide 8, "What would HB 120 change?":
This bill does NOT:
• Change the 0.17 percent RCC cap.
• Create new authority for the Attorney General to
participate in matters before FERC.
This bill will:
• Allow some costs incurred by the department in
matters before FERC (TAPS pipeline tariffs) in
the pipeline RCC.
This bill might:
• Increase the amount of RCC allocated to
pipelines.
• Because the size of the "pie" is not changing, an
increase in the pipeline RCC would reduce the RCC
paid by utilities.
Vice-Chair Bishop noted that the scenario used the pipeline
tariffs as an example. He stressed that the bill did not
provide additional funding. He wondered whether the
arguments were based on the existing budget.
Mr. Ptacin explained that the deficit that was not
collected from the RCC came out of general funds.
9:30:39 AM
Mr. Ptacin spoke to slide 9, "How would HB 120 impact
consumers?":
• Pipelines can pass the RCC onto customers for in-
state shipments.
• This increase would not be significant because the
cost is spread across all regulated pipelines and
each unit of oil or gas shipped.
• For example, adding $100,000 to the pipeline RCC for
the last two quarters of 2017 would increase the
pipeline RCC surcharge by about 0.048 percent, i.e.,
a $10,000 billing to a pipeline customer would
increase by $4.84.
• The $4.84 surcharge helps ensure the $10,000 bill is
"just and reasonable."
Mr. Ptacin showed slide 10, "Why now?":
• For over 30 years, outside counsel has represented
the state on FERC pipeline matters.
• To reduce costs, Law is developing the necessary
expertise and bringing more of this work in-house.
• In the process of budgeting for this increased in-
house workload and searching for budget
efficiencies, it came to our attention that the RCC
may be an appropriate funding source.
9:34:03 AM
Co-Chair Hoffman referenced slide 10, and asked how much
the state had spent on outside counsel. He queried the
numbers related to reduced costs associated with switching
to inhouse counsel.
Mr. Ptacin agreed to provide detailed information. He
furthered that he had been involved in Trans-Alaska
Pipeline System (TAPS) tariff litigation from 2009 to 2015.
He remarked that the litigation of those cases in 2009 to
2010, the state spent $16 million. The competitors spent
$55 million. He felt that a bringing similar cases to LAW
would not yield the same cost. He stated that in the year
2016, as a result of the TAPS tariff litigation, LAW went
to the DC Court of Appeals. He stated that typically
outside counsel would have been hired, but instead the work
was done inhouse for under $25,000.
Senator Micciche queried the role of the department to
interfere with FERC determinations.
Mr. Ptacin stated that there were a series of feeder
pipelines that fed into TAPS, and provided they had
interstate shipping, there must be an interstate and
intrastate rate.
Senator Micciche asked if any of the work had been for the
AKLNG projects.
Mr. Ptacin was not aware of any work the department would
do on the AKLNG projects.
Vice-Chair Bishop suggested that there could be crossover
into hydro-projects with FERC.
Mr. Ptacin stated that there were FERC processes. He
thought it was possible at some point there could be FERC
rate issues associated with a hydro-electric projects.
Senator Stevens wondered whether the state would still use
outside counsel.
Mr. Ptacin answered in the affirmative, and reiterated that
the department would still retain outside counsel.
Senator von Imhof wondered whether there was an impeding
need to go before FERC. She asked if there were high
priority or outstanding issues. She wondered whether the
bill was a "blanket" need.
Mr. Ptacin stated there was no impending necessity for the
bill, however the division was very busy. It had entered
into an agreement with TAPS that included a variable
tariff. The division had to annually negotiate a fair and
reasonable rate.
9:41:23 AM
Co-Chair MacKinnon referenced slide 7, and asked if it
showed that the state was collecting money that was going
unspent.
Mr. Ptacin answered in the negative.
Co-Chair MacKinnon wondered whether there was the ability
to collect through a 0.17 percent statutory cap, $2.37
million. She remarked that the budget was $2.333 million,
which represented $43,690 under the cap. She stressed that
there could be a higher charge, because there was the
ability for increased collection.
Mr. Ptacin answered in the affirmative.
Co-Chair MacKinnon wondered whether the state could charge
additional resources to the funding stream.
Mr. Ptacin answered in the affirmative.
Senator Micciche asked for more detail as to the increased
pipeline cost as listed on slide 8.
Mr. Ptacin relayed that under current state law, there was
two ways in which the division dealt with those costs. He
stated that the bill would ensure that RCC charges could be
assessed. The cap for the pipelines was only 0.17 percent
of any adjusted revenues.
9:46:00 AM
Co-Chair MacKinnon referenced the proposed statute to
change in the bill. She stated that the bill was about
whether it was in the public's interest for LAW to engage
on behalf of Alaska in this process. She stated that LAW
was asking to recover fees.
Senator Micciche wondered whether there would be a cost
shift from utilities.
Mr. Ptacin stated there would be no cost shift from
utilities to the state, but it arguably could go the other
direction. The department was asking (to the extent that it
did pipeline work) that it could collect for the work.
Senator Micciche thought the last sentence on slide 8 was
confusing.
Mr. Ptacin agreed that the sentence was strangely written.
9:50:56 AM
Senator von Imhof asked if there had been a time when Mr.
Ptacin testified before FERC on a planning stage of a
pipeline. She wondered if there was a future pipeline in
the works.
Mr. Ptacin stated that his section would not involve until
a pipeline company went before FERC with a proposed rate.
Co-Chair MacKinnon wondered whether LAW had the authority
to enter into conversations with FERC without the proposed
legislation.
Mr. Ptacin stated that when his section was before FERC, it
was usually for a protest.
Co-Chair MacKinnon thought the bill expanded the
department's authority to engage with FERC.
Mr. Ptacin stated that it was not his understanding that
the bill language had to do with a funding mechanism for
the RCC.
Co-Chair MacKinnon asked Mr. Ptacin to confer with the
attorney general to determine the impact of the bill.
Mr. Ptacin agreed to provide the information.
9:54:06 AM
Vice-Chair Bishop surmised that intervention at FERC could
only occur on current production pipeline.
Mr. Ptacin agreed.
Vice-Chair Bishop surmised that the bill needed a general
fund funding mechanism.
Mr. Ptacin agreed.
Co-Chair MacKinnon noted that the title stated that it was
to participate as an advocate.
Vice-Chair Bishop agreed. He noted that there could be a
title change.
Senator Micciche remarked that the state had full standing
to intervene in any FERC matter that occurred within the
jurisdiction of the state. He saw the bill as a funding
mechanism. He wondered whether in certain cases, LAW would
bill for work on FERC under pipelines. He stated that it
would not reduce the utility RCC, but may increase the
pipeline RCC.
Mr. Ptacin answered in the affirmative. He stated that the
section had no intention of charging a utility for work
that was not related to that particular utility.
9:56:40 AM
Mr. Ptacin looked at slide 11, "Is there a check on RCC
spending?":
External limits on RAPA's RCC spending include:
1.Statutory 0.17 percent cap on RCCs for RAPA.
2.RCA review of RAPA's certified costs in a public
docket where any interested party can comment.
Co-Chair MacKinnon asked for Mr. Ptacin to provide a
summary of the cost of outside council for the past XX
years.
Mr. Ptacin agreed to provide the information.
Co-Chair MacKinnon wondered what happened to those
receipts.
Mr. Ptacin responded that it was money that was not
collected.
Co-Chair MacKinnon surmised that the money was not
collected over a period of time.
Mr. Ptacin stated that the RCC looked at the previous
year's billings and adjusted revenues to determine the
year's maximum charge.
Senator Stevens appreciated the question about costs of
outside counsel that was spent by competitors.
Mr. Ptacin agreed to provide that information.
Senator Micciche stated that many of the energy firms had
strong expertise. He wondered whether the prep work would
be done inhouse in order to reduce costs.
Mr. Ptacin answered in the affirmative.
Co-Chair MacKinnon OPENED public testimony.
Co-Chair MacKinnon CLOSED public testimony.
Vice-Chair Bishop discussed a new zero fiscal note from
Department of Law, OMB component 2764.
Senator Micciche thought the fiscal note was a bit unusual,
as it provided additional authority. He thought there was
likely a differential from what was currently collected.
Co-Chair MacKinnon discussed committee business.
HB 120 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
10:02:25 AM
The meeting was adjourned at 10:02 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 195 Background Document.pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 195 |
| HB 195 Letter of Support McCue.pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 195 |
| HB 195 Opposition Lynch.pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 195 |
| HB 195 Transmittal Letter.pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 195 |
| HB 195 Sectional Analysis.pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 195 |
| HB 195 Support Letters.pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 195 |
| HB 195 Opposition Opheim.pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 195 |
| SB58 HB120 summary statement (01.22.18).docx |
SFIN 2/26/2018 9:00:00 AM |
HB 120 SB 58 |
| HB 120 presentation for SFIN (02.26.18).pdf |
SFIN 2/26/2018 9:00:00 AM |
HB 120 |