Legislature(2001 - 2002)

06/25/2002 10:17 AM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                   SENATE JUDICIARY COMMITTEE                                                                                 
                          June 25, 2002                                                                                         
                           10:20 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                              
Senator Robin Taylor, Chair                                                                                                     
Senator Dave Donley, Vice Chair                                                                                                 
Senator John Cowdery                                                                                                            
Senator Gene Therriault                                                                                                         
Senator Johnny Ellis                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All Members Present                                                                                                             
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 3001                                                                                                            
"An Act  setting timelines  for issuance  of final  orders  by the                                                              
Regulatory  Commission of  Alaska, amending  the authority  of the                                                              
commission to  enter compromise  settlement orders,  and extending                                                              
the commission's termination date  to June 30, 2006; and providing                                                              
for an effective date."                                                                                                         
     HEARD AND HELD                                                                                                             
                                                                                                                                
CS FOR HOUSE BILL NO. 3001(FIN) am                                                                                              
"An Act  setting timelines  for issuance  of final  orders  by the                                                              
Regulatory  Commission of  Alaska, amending  the authority  of the                                                              
commission to  enter compromise  settlement orders,  extending the                                                              
commission's  termination date  to  June 30,  2004, requiring  the                                                              
commission  to hold monthly  meetings to  allow discussion  of the                                                              
commission's   process   and   procedures;   and   directing   the                                                              
establishment  of  an advisory  committee;  and  providing for  an                                                              
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                              
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
See Senate Judiciary  minutes dated 6/12/02, 6/13/02,  6/20/02 and                                                              
6/21/02.                                                                                                                        
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Mr. Bruce Davison                                                                                                               
President                                                                                                                       
Chugach Electric                                                                                                                
PO Box 196300                                                                                                                   
Anchorage, AK  99519-6300                                                                                                       
                                                                                                                                
Mr. Joe Griffith                                                                                                                
General Manager                                                                                                                 
Chugach Electric                                                                                                                
PO Box 196300                                                                                                                   
Anchorage, AK  99519-6300                                                                                                       
                                                                                                                                
Mr. Wes Carson                                                                                                                  
ACS                                                                                                                             
600 Telephone Ave.                                                                                                              
Anchorage, AK 99503                                                                                                             
                                                                                                                                
Ms. Dana Tindall                                                                                                                
Sr. Vice President, Legal and Governor Affairs                                                                                  
GCI                                                                                                                             
2550 Denali St., Suite 1000                                                                                                     
Anchorage, AK 99503                                                                                                             
                                                                                                                                
Mr. Jimmy Jackson                                                                                                               
GCI                                                                                                                             
2550 Denali St., Suite 1000                                                                                                     
Anchorage, AK                                                                                                                   
                                                                                                                                
Ms. Kristi Catlin                                                                                                               
Director, Government Relations                                                                                                  
AT&T Alascom                                                                                                                    
Anchorage, AK                                                                                                                   
                                                                                                                                
Mr. Eric Yould                                                                                                                  
Executive Director                                                                                                              
ARECA                                                                                                                           
Anchorage, AK                                                                                                                   
                                                                                                                                
Mr. Buki Wright                                                                                                                 
General Manager                                                                                                                 
Aurora Energy                                                                                                                   
City of Fairbanks                                                                                                               
Fairbanks, AK                                                                                                                   
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 02-45, SIDE A                                                                                                            
                                                                                                                                
[THE FOLLOWING IS A VERBATIM TRANSCRIPT]                                                                                        
        SB 3001-REGULATORY COM. OF ALASKA: SUNSET & MISC                                                                    
        HB 3001-REGULATORY COM. OF ALASKA: SUNSET & MISC                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  ...meeting again  come to  order, there  being a                                                              
quorum present,  that being  Senators Ellis, Cowdery,  Therriault,                                                              
Donley and  Chair Taylor  and the  matter before  us again  was SB
3001, a bill introduced by the Governor  for an early extension of                                                              
the Regulatory  Commission of Alaska and some  additional matters.                                                              
And, as I said, it is my understanding  the House has come up with                                                              
a  bill   significantly  different   from  that  which   has  been                                                              
submitted. Members are  ready to testify from Chugach  - if you'll                                                              
give us your full names please and proceed.                                                                                     
                                                                                                                                
MR.  BRUCE  DAVISON:  Thank  you   Senator  Taylor  and  committee                                                              
members. My name  is Bruce Davison. I am president  of the Chugach                                                              
Electric Board  of Directors. With me  is Joe Griffith.  He is the                                                              
general  manager  of  Chugach  Electric.   He'll  also  have  some                                                              
testimony with the Chair's permission.                                                                                          
                                                                                                                                
Thank  you  for this  opportunity  to  address you  regarding  the                                                              
reauthorization  of  the Regulatory  Commission.  The  legislation                                                              
creating the  RCA included routine  sunset provisions  calling for                                                              
an expiration  date of July 1,  2003, approximately one  year from                                                              
now. If the RCA is not authorized  in the special session, it must                                                              
begin a year-long phase down period.  During this period, the 2003                                                              
legislature  could  still  consider  an appropriate  fix  for  the                                                              
process as an  alternative to outright elimination  and that's the                                                              
position that Chugach espouses today.                                                                                           
                                                                                                                                
As president of the board of Alaska's  largest electric utility, I                                                              
believe the RCA needs to accomplish  its mission in a timelier and                                                              
less costly manner and I'll give  you some financial statistics in                                                              
just a  moment. We need  to address the  RCA's delays  in deciding                                                              
matters, the manner in which the  RCA controls its proceedings and                                                              
its apparent  reluctance to decide  issues. These factors  carry a                                                              
hefty price tag for Chugach consumers  and members at every level.                                                              
To date, for example, Chugach Electric  provided over 60,000 pages                                                              
of  information  to each  of  four  parties  involved in  a  legal                                                              
discovery process  in our pending rate determination  proceedings.                                                              
At least  one additional  such discovery  is scheduled.  Producing                                                              
this amount  of paper is a  costly, monumental and  time consuming                                                              
task. In  other dealings  with the  RCA, we  frequently find  that                                                              
important issues are not resolved.  We end up considering the same                                                              
issues  in multiple  proceedings and  in our current  case  we are                                                              
again  considering  a financing  issue  that has  been  considered                                                              
twice before. This type of repetition  is costly and, in our view,                                                              
unnecessary.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: Bruce, if you're  at a point where you could hold                                                              
for a minute?  I have no idea  where these melodies and  tunes are                                                              
coming from.                                                                                                                    
                                                                                                                                
SENATOR DONLEY:  Hey, one of my  first jobs was running  the muzak                                                              
machine.                                                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: There you go. They are somewhat distracting.                                                                   
                                                                                                                                
MR.  DAVISON: I  thought that  was the  ice cream  truck down  the                                                              
street.                                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: I assume - we're  trying to be teleconferenced to                                                              
as many  different locations  in the  state as  have called  in to                                                              
convenience them  and I think what's  happened is - it's  the kind                                                              
of background music you hear when  they put you on hold at certain                                                              
offices so  - I think  we've got that eliminated  now so if  you -                                                              
proceed, go right ahead.                                                                                                        
                                                                                                                                
MR. DAVISON: We  believe that the existing process  is inefficient                                                              
and that our  members are not receiving value  from the regulatory                                                              
processes before the  RCA. Chugach co-op members must  pay for the                                                              
operation of  the RCA in their  monthly electric bill  through the                                                              
regulatory cost charge [RCC], which  totals approximately $360,000                                                              
per year.  In addition, base electric  rates are also  impacted by                                                              
inefficiencies, that  is, our costs  to our members are  driven up                                                              
by  the expenses  of attorneys  and  the heavy  costs of  funding,                                                              
organizing and packaging documents  in the discovery process. That                                                              
costs  us  approximately  $800,000  per  year,  internal  overhead                                                              
costs.  That does not  include the  costs of  outside counsel  and                                                              
consultants. In  a typical year, Chugach Electric  employees spend                                                              
over 7,700  man hours -  again, not including outside  consultants                                                              
or  attorneys in  dealing with  RCA issues.  In addition,  Chugach                                                              
loses approximately  $200,000 per  month in lost  revenues because                                                              
the RCA  has not ruled  on our  permanent rate increase  requests.                                                              
The Chugach  Board of Directors  and management has  an obligation                                                              
to its  member owners to  assure that  costs incurred are  for the                                                              
benefit of  the Chugach  co-op members. The  current high  cost of                                                              
regulation,  and  more importantly,  the  diversion  of key  staff                                                              
resources are benefiting no one.                                                                                                
                                                                                                                                
Chugach is  not the only utility  that has concerns with  the RCA.                                                              
Others  have noted  that  the RCA  has a  larger  budget and  more                                                              
people  than its  predecessor, the  APUC, but  still operates  too                                                              
slowly. The executive director of  ARECA, that is the Alaska Rural                                                              
Electric  Co-op Association,  stated  in a  recent  letter to  the                                                              
House  Finance  Chairman,  Eldon  Mulder,  quote,  the  regulatory                                                              
process is  still broken  and must be  fixed. The present  process                                                              
costs the  electric utility  industry much time  and money  to run                                                              
the regulatory  gauntlet. We firmly  agree. In fact, we  prefer no                                                              
economic  regulation  at  all  as   the  electric  boards  of  our                                                              
cooperatives are perfectly  capable of balancing the  needs of the                                                              
association with the  needs of its member owners. In  31 of the 46                                                              
states  that  have   electrical  co-ops,  there   is  no  economic                                                              
regulation. It is totally optional.  We appreciate the willingness                                                              
and the  involvement of the  Senate Judiciary, that  the committee                                                              
has shown  in addressing the problems  that plague the  RCA's rate                                                              
making process and  we welcome a more thorough  examination of all                                                              
of  the issues  involved. Addressing  the  ineffectiveness of  the                                                              
RCA's current  regulatory process  will ultimately benefit  all of                                                              
the consumers  in the Railbelt. I  believe there are  solutions to                                                              
the problems  that we  are encountering. I  also believe  that the                                                              
solutions  can be worked  out in  the next  six months before  the                                                              
next legislative  session convenes.  Thank you  for your  time and                                                              
attention and I'd be happy to answer any questions.                                                                             
                                                                                                                                
CHAIRMAN TAYLOR: Go right ahead, Joe.                                                                                           
                                                                                                                                
MR. JOE GRIFFITH:  Mr. Chairman, let me summarize  one of the main                                                              
points that  we hope  to bring to  you down  here today.  We're on                                                              
record  having   testified  at  least  on  two   other  occasions,                                                              
specifically  about  examples.  If   those  are  necessary  to  be                                                              
provided, we'd happily  provide them again but in  the interest of                                                              
time let me say  that first we think the Commission  takes far too                                                              
long to  make their  decisions. The process  can be shortened  and                                                              
should be shortened.  It simply takes too long and  costs too much                                                              
money and  I won't give  you the examples  though there  are those                                                              
that they are in other documents  that have already been prepared.                                                              
Second,  we don't believe  the Commission  controls its  processes                                                              
very well.  You heard  my board president  say that we've  already                                                              
produced over  60,000 pages of  discovery in this  ongoing current                                                              
rate case  that we have and  this is -  we at least have  one more                                                              
round. We've had  about 13 depositions of senior  staff across the                                                              
company and  we're spending  a great deal  of time with  very high                                                              
priced staff,  either in  discovery or  depositions and  not doing                                                              
what our primary  business is, which  is to keep the lights  on in                                                              
the Railbelt.  There does  not appear to  be any immediate  end to                                                              
                                                             th                                                                 
that  and, in  fact, my  deposition  is scheduled  for the  8   of                                                              
July.  It   should  be  another   interesting  one.   Thirdly  the                                                              
Commission  processes issues  again  and again  and  again and  it                                                              
can't  seem  to  come  to  a  final  decision  in  many  of  these                                                              
circumstances  so the result  is that things  don't go  away. They                                                              
keep coming  back to haunt  you after  you thought that  they were                                                              
put to bed. One financing issue has  been considered twice before.                                                              
It's now  again and, in  fact, it will a  part and parcel  of this                                                              
deposition that  I mentioned  to you that  I will be  subjected to                                                              
the 8 of July.                                                                                                                  
                                                                                                                                
The rate  case that we  started in 1996  is still open.  That's an                                                              
excessive period.  We're beginning  to hone in  on the end  but it                                                              
clearly is taking  too long. We believe the Commission  has a role                                                              
in  this  state. Most  assuredly  they  provide  a forum  for  the                                                              
members and  customers of the  various utilities to  converse with                                                              
it  who  have problems.  They  also  provide  a valuable  role  in                                                              
defining  the  boundaries  until  we become  a  fully  deregulated                                                              
across the  board. We need  them but we  need to fix  what they're                                                              
doing  and our  suggestion  is  very simply  put  some  sort of  a                                                              
management audit  on top of these  folks. Take a look at  how they                                                              
do  business. Come  back with  a  report, preferably  to the  next                                                              
legislature and  let's establish  some guidelines and  some people                                                              
as an oversight group - give them  some timelines. Then I think we                                                              
can  all  go  off  into  the  sunset  doing  business  in  a  more                                                              
productive manner. I'd be happy to  answer any questions you might                                                              
have.                                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: Senator Cowdery.                                                                                               
                                                                                                                                
SENATOR  COWDERY:   How  many,  approximately,  in   the  electric                                                              
utilities do  you know - or maybe  I should ask RCA but  - do they                                                              
manage statewide?                                                                                                               
                                                                                                                                
MR. GRIFFITH: In the Railbelt it's  five and it must be another 20                                                              
in the rest  of the state so  it's a relatively large  number. I'm                                                              
sure Ms. Thompson has a better feel for the rest of the state.                                                                  
                                                                                                                                
SENATOR COWDERY: Thank you.                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Other questions?                                                                                               
                                                                                                                                
SENATOR COWDERY: Let me follow -  do you think that their workload                                                              
due to all of this is too large?                                                                                                
                                                                                                                                
MR. GRIFFITH: Yes I do.                                                                                                         
                                                                                                                                
SENATOR COWDERY: Thank you.                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Senator Therriault had a question I think?                                                                     
                                                                                                                                
SENATOR THERRIAULT: Yea, thank you.  In your comments you said you                                                              
see a role for the RCA and we've  heard testimony and I believe it                                                              
was  Friday the  gentleman from  APU in  Anchorage testified  that                                                              
statutory changes  that people  are desirous  of seeing  should be                                                              
separated from the extension and  I think in your comments did you                                                              
say that we shouldn't  extend at this time? That  we can take care                                                              
of everything [indisc.] in the sunset year?                                                                                     
                                                                                                                                
MR. DAVISON: Right.  That's our position. There's  one year before                                                              
they  would  actually  under  the statute  be  required  to  cease                                                              
operations. There's  a six-month period  between now and  the next                                                              
legislative session.  Our suggestion is to establish  an oversight                                                              
committee.  Use  that   six  months  to  come   up  with  positive                                                              
recommendations  to give  to the  next session.  The next  session                                                              
will  then have  an  entire legislative  session  to consider  the                                                              
recommendations,  implement  them  and enact  new  legislation  to                                                              
authorize the continuance of the  RCA for whatever time period and                                                              
under  whatever  conditions they  deem  best after  reviewing  the                                                              
committee's report.                                                                                                             
                                                                                                                                
SENATOR THERRIAULT:  I think, as  you talked about the  dates, you                                                              
said the  termination is next year  but if you look  at 44.66.010,                                                              
which talks about  the termination of boards and  commissions, and                                                              
if you  look into  the bill  that the  Governor's introduced,  the                                                              
commission  terminates   the  end   of  this  month.   That's  the                                                              
termination  date  and for  the  wind-down  year, that's  the  (b)                                                              
section  of  that  statute.  It   says  upon  termination  so  the                                                              
legislature, without  taking some action  to extend, would  have -                                                              
we would have gone beyond that termination  date so the commission                                                              
would  have terminated  and -  according  to the  language in  the                                                              
statute, and  then had one year  after termination to wrap  up its                                                              
business. We've  heard testimony  from Enstar and  other utilities                                                              
that  that causes  them  a lot  of  concern with  their  financial                                                              
markets. We've got people up in Fairbanks  that would testify that                                                              
that causes them concern too. So,  it doesn't seem to - I have not                                                              
heard anything  that seems  to justify in  my mind that  we should                                                              
take that step of actually terminating  them and putting them into                                                              
their wind-down  year versus  doing a  shorter extension  than was                                                              
recommended by  the auditor while  these other statutory  changes,                                                              
which I believe  there is quite a  bit of support for  a number of                                                              
these things,  are worked out and  the legislature comes  back and                                                              
then considers them.  So I guess - I don't understand  what is the                                                              
necessity of actually putting them  into termination - terminating                                                              
them according to  language in the statute so that  we can work on                                                              
these things. It seems like we could  work on them without causing                                                              
the problems  that have  been testified  to by  putting them  into                                                              
that wind-down year.                                                                                                            
                                                                                                                                
MR. DAVISON: I  think there's a two-part response.  The first part                                                              
is that that  will provide the necessary incentive  to address the                                                              
problems  that we  view  as seriously  affecting  our company  and                                                              
without the deadline  of a termination of that  particular agency,                                                              
we'll  be back  here again  next  year giving  the same  arguments                                                              
debating the same issues. Second  of all, and I'll refer this part                                                              
of the  response to Joe  Griffith, this is  not the first  time in                                                              
this state that an agency has been  sunsetted and, at least, based                                                              
on his experience  in the past,  there is no catastrophic,  sky is                                                              
falling need  to extend a year before  you have the sunset  year -                                                              
and Joe, you've got some experience in that.                                                                                    
                                                                                                                                
MR. GRIFFITH:  If I may, Mr.  Chairman. In '94 we  essentially did                                                              
exactly the same  thing with the APUC and it seemed  to work quite                                                              
well. The  transition was  almost seamless  and the next  upcoming                                                              
legislature reauthorized  it and I guess  we don't see it  as that                                                              
big a  problem.  Our view of  the process  is such  that it  isn't                                                              
getting the result  it should right now. We think  something needs                                                              
to  be done  to get  somebody's  attention  to fix  some of  these                                                              
costly delays that  we face and until - I guess  our thought is if                                                              
you don't  do that, then what  you're saying is business  as usual                                                              
at least for  another year or two  or however long that  you might                                                              
extend it. We  don't think that's in the interest  of the citizens                                                              
of Alaska or our consumers [indisc.].                                                                                           
                                                                                                                                
SENATOR COWDERY: In  the last hearing - or the  Anchorage hearings                                                              
anyway, I  don't know if it's  the last one  but - on the  cost of                                                              
delays that  you brought up.  That was sort  of disputed by  the -                                                              
the cost is  a false cost, that  it really wasn't a cost.  I think                                                              
that you  sat through  that. Could  you respond  to that  again? I                                                              
mean...                                                                                                                         
                                                                                                                                
MR. GRIFFITH: I  understand the question and the  assertion and if                                                              
you took  it flatly on the  statement it is not  a cost - it  is a                                                              
lost revenue.  The longer  these  things draw  out, if you  decide                                                              
that  because of  your revenue  requirement  calculation that  you                                                              
need a  rate increase and  you don't get  the full amount,  and we                                                              
are operating currently under an  interim refundable rate and have                                                              
been since July of 2001, there's  always the possibility you might                                                              
have to  pay that  back and it  could become a  big cost.  But the                                                              
numbers  I gave  you was  related  to the  difference between  the                                                              
interim refundable rate that they  placed us under in July of 2001                                                              
and what  we had  really asked for  and that  number you  heard is                                                              
about $200,000 a month of lost revenue.  It is not a cost. That is                                                              
true. It is a lost revenue that you never will, ever recover.                                                                   
                                                                                                                                
SENATOR  COWDERY:   Kind  of  like   the  wind-down  of   our  oil                                                              
production.  We're not  going to  recover that  until we get  more                                                              
production or the gas line or something like that.                                                                              
                                                                                                                                
MR. GRIFFITH: Well I can never recover  it until they authorize me                                                              
to charge at a  higher level and they may not.  I understand that.                                                              
That's the risk  of a regulatory body and that's  their purpose is                                                              
to substitute for  the marketplace and, in most cases,  they do it                                                              
well. It just takes too long to get there.                                                                                      
                                                                                                                                
SENATOR COWDERY:  You said earlier -  or someone said that  all he                                                              
wanted  was a decision,  a firm  decision, and  hopefully in  your                                                              
favor but he would accept that even if it wasn't.                                                                               
                                                                                                                                
MR. GRIFFITH: A decision - a good  decision that we stood by. Even                                                              
if I didn't like it, it's better than no decision.                                                                              
                                                                                                                                
SENATOR COWDERY: Thank you.                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Senator Therriault.                                                                                            
                                                                                                                                
SENATOR  THERRIAULT:  Under  AS  42.05.711  and  712  sets  out  a                                                              
mechanism whereby a utility can ask  to be - ask its members to be                                                              
exempt from  regulation by the RCA.  It sets out a  mechanism here                                                              
and says  how the language  shall even  appear on the  ballot. Are                                                              
you aware  of that provision and  have you thought about  going to                                                              
your membership to ask for an exemption?                                                                                        
                                                                                                                                
MR. GRIFFITH: I'm aware of it and we have thought about it.                                                                     
                                                                                                                                
SENATOR THERRIAULT: Any why have you not done it?                                                                               
                                                                                                                                
MR. GRIFFITH:  We haven't decided  that it's worthy of  heading in                                                              
that direction at this point.                                                                                                   
                                                                                                                                
CHAIRMAN  TAYLOR: I just  had a  couple -  Joe, you actually  went                                                              
through the 1994 grace period or  wind-down year with the APUC and                                                              
you were managing  the utility or operating within  the utility at                                                              
that time?                                                                                                                      
                                                                                                                                
MR. GRIFFITH:  At that time  I had the  - our regulation  division                                                              
was under my tutelage, yes.                                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR:  And  you  indicated  that there  was  almost  a                                                              
seamless  transition?  I think  those  were your  words?  Governor                                                              
Hickel was a lame duck governor at  that time when the '94 session                                                              
concluded. Are you  aware of any companies in the  state that went                                                              
to him  and demanded that  he call a  special session to  save the                                                              
APUC because it was going to go into  this terrible wind-down year                                                              
and all of these evil, awful things  were going to happen to them?                                                              
Do you  remember anything  like that because  I don't. I  was here                                                              
too and I was in the legislature at that time.                                                                                  
                                                                                                                                
MR. GRIFFITH: I'm not aware of any.                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR:  I'm not either.  Is there any  historical basis,                                                              
in your  opinion, for  the histrionics  and rhetoric  that  I hear                                                              
coming  out  of   the  Chairman  of  the  RCA  and   out  of  this                                                              
Administration  about how  people are  going to  leave their  jobs                                                              
because they'll be insecure - financial  markets are going to just                                                              
crumble and not  be available to anyone? They won't  be able to do                                                              
any  of their  work so  all of  their utilities  relying on  pass-                                                              
through  federal  dollars  and  other   things  will  be  held  in                                                              
jeopardy, or at least threatened  by these Commissioners and their                                                              
public statements. Did  any of that take place with  the old APUC?                                                              
Did they hold people hostage and threaten utilities and so on?                                                                  
                                                                                                                                
MR. GRIFFITH: Not to my knowledge.                                                                                              
                                                                                                                                
CHAIRMAN TAYLOR: How come is there  a difference, in your opinion,                                                              
today? I'd  really like  to understand  this because we're  seeing                                                              
extreme  levels  of  political  pressure  being  brought  on  this                                                              
legislature  for the early  extension of  one petty little  agency                                                              
and we're all sitting  here because of it and I'd  like to know if                                                              
you've had any understanding as to why we're here?                                                                              
                                                                                                                                
MR. GRIFFITH: Mr. Chairman, I don't.  I could opine, I'm sure, for                                                              
the next two hours  on all of the events that have  led us to this                                                              
point  today.  From my  perspective  I  have not  encountered  any                                                              
problem  with the  financial  markets in  view  of our  discussing                                                              
this.  I have  $330 million  in public  debt in  this country  and                                                              
rated by three rating agencies. None  of them have had any problem                                                              
with the  discussion that we're having.  I think I  can understand                                                              
the Commission Chair's  point of view. Were I in  her seat, I'd be                                                              
concerned  about my  people and  about  the future  and about  the                                                              
workload they have  and all of those, and perhaps  that the source                                                              
of some of the concern we're seeing  is just that bad things could                                                              
come of something like this. Maybe  that's the fear but that's one                                                              
man's opinion and you shouldn't rely on it.                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Is there any basis,  other than paranoid opinion,                                                              
for the horror  stories and the  sky is falling spin  story that's                                                              
been going  on out there now for  about a month in the  press. I'd                                                              
like to know if there's any historic  basis anyplace in Alaska for                                                              
that or  if this  is just all  emotional spin  so as to  drive the                                                              
Legislature to do the Governor's bidding.                                                                                       
                                                                                                                                
MR.  GRIFFITH: Mr.  Chairman, I  can't  answer that  for you.  I'm                                                              
afraid I  don't have  the answer  to that. I  think we  could wind                                                              
this thing  down in a year  if we had to  or we could fix  it in a                                                              
year if we had to and we'd be happy  to participate in that in any                                                              
manner.                                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: Do you think we ought to do it in two days?                                                                    
                                                                                                                                
MR. GRIFFITH: No. I think anything  you do in two days is probably                                                              
the law of  unintended consequences will  reign in the end  and we                                                              
may be unhappy with where we end up in two days.                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: I wish  I could  agree with  you. I think  we're                                                              
going to end  up with some very significant  intended consequences                                                              
- consequences  intended  politically to  benefit certain  special                                                              
interests that don't  have a blooming thing to do  with the people                                                              
of Alaska  or your  rate payers.  I think  that's the last  people                                                              
that are probably going to be given  consideration around here, at                                                              
least if I  look at what the House  is doing right now.  I want to                                                              
thank  you  very much  for  coming  in  and  if you  have  further                                                              
questions? Go right ahead Senator Therriault.                                                                                   
                                                                                                                                
SENATOR THERRIAULT:  Let's talk a little bit about  what the House                                                              
has done.  It's my understanding,  and I  have not looked  through                                                              
the  bill extensively,  but they  have some  timeline language  in                                                              
there.  They  have  some  language with  regard  to  an  oversight                                                              
committee that  would make a report  to the legislature.  It seems                                                              
like those two  things were encapsulated in the  comments that you                                                              
made as things  that you see  as being desirable. Can  you comment                                                              
on what the House Finance Committee passed out?                                                                                 
                                                                                                                                
MR. GRIFFITH: What  I said yesterday after a very  brief review of                                                              
the bill was that, in my view, it  was putting the cart before the                                                              
horse in  that the  Commission would  be reauthorized before  this                                                              
oversight committee  had any opportunity to review  what needed to                                                              
be  done  or what  recommendations  were  going  to be  made.  For                                                              
example, certain  timelines are set.  That was the  primary thrust                                                              
of the legislation.  All of the  timelines that were set  could be                                                              
extended by  the Chairman  of the  commission, presumably  only if                                                              
good cause  existed but  who's to say  exactly what that  means. I                                                              
don't know  if these  timelines are  good or not.  It seems  to me                                                              
that  would be  one of  the duties  that  the oversight  committee                                                              
would undertake is  to see what timelines need  to be established,                                                              
what other  procedural types of rules  need to be  established and                                                              
then report  back to  the legislature  the recommendations  of the                                                              
committee  that  then   would  be  the  basis   for  the  enabling                                                              
legislation  to allow  the Commission  to be  reauthorized. To  me                                                              
that seems  to be a more logical  order than in two or  three days                                                              
having this Legislature  decide what rules should  be imposed upon                                                              
the  Commission to  satisfy  the concerns  and  problems that  the                                                              
utilities have testified to.                                                                                                    
                                                                                                                                
SENATOR THERRIAULT: So are you not supportive of the House bill?                                                                
                                                                                                                                
MR. GRIFFITH: No.                                                                                                               
                                                                                                                                
SENATOR THERRIAULT: And their extension - was it for two years?                                                                 
                                                                                                                                
MR. GRIFFITH:  It would  be two  years after  July 1, 2003,  which                                                              
would run it to, I believe, July 1, 2005.                                                                                       
                                                                                                                                
SENATOR THERRIAULT:  So, if  we were  to extend  for one  year, so                                                              
that basically  we'd have  another legislative  budget and  audit,                                                              
which  includes  a provision  where  you  as  a company  can  make                                                              
comments  to the auditor  confidentially  to be incorporated  into                                                              
the  report  made to  the  legislature.  If there's  an  oversight                                                              
committee that  also looks at  the way the Commission's  conducted                                                              
itself, whether it's either through  regulations or implementation                                                              
of statutory  directives  from the legislature  - whether  they're                                                              
following the intent of the legislature  - and that to report back                                                              
to the  legislature. I guess  I don't  - I still don't  understand                                                              
why you say it's  the cart before the horse because  it seems like                                                              
what you're asking  for, is that the legislature,  even though you                                                              
say that  you would  like the  Commission to  be extended  or that                                                              
there's a  need for a Commission,  you want the Legislature  to be                                                              
pushed right  up to the  brink - basically  over a barrel  so that                                                              
some piece  of legislation  absolutely has to  be passed.  And the                                                              
history,  people say well  you only  get to  these things  when it                                                              
comes  up for  the sunset  every four  years or  whatever and  the                                                              
legislature  won't  consider  any  changes in  between  then,  the                                                              
reason  for  that  is  every time  a  piece  of  legislation  gets                                                              
introduced, we  get to the  end of the session  or the end  of the                                                              
process.  Amendments come  from nowhere  - floor  amendments -  no                                                              
committee debate, and what you're  basically asking us to do - and                                                              
that's been certainly  the ten year history and  my involvement in                                                              
these  types  of  issues,  what  you're  asking us  to  do  is  to                                                              
basically put  the Commission  right up that  brink and  God knows                                                              
what  we'll be  faced  with  then as  far  as amendments  -  floor                                                              
amendments  - and no  committee process.  That's something  that I                                                              
just don't  see any justification  for, when  we can extend  for a                                                              
year -  that's 12  months while the  legislature can  thoughtfully                                                              
work  these things  out  - and  your own  criticism  of the  House                                                              
Finance bill yesterday, perhaps happening  too quickly, not enough                                                              
time for  different utilities  to make comments  on it. I  had one                                                              
utility in Fairbanks  tell me that the timeline  language that was                                                              
worked  out -  they  really didn't  want to  see  it pass  because                                                              
they're not sure  that it was short enough. I just  have still not                                                              
been given any kind of justification  for pushing this whole thing                                                              
right  to  the  brink  -  basically,  according  to  the  statute,                                                              
terminating the Commission and putting  it into its wind-down year                                                              
and  all of  the potential  negatives  that we've  heard based  on                                                              
that. You still haven't given me  a justification to do all that -                                                              
seems all  of the  things you  want to  do, work  things out  in a                                                              
methodically,  timely way  can be  done.  As far  as a  difference                                                              
between now and '94, in '94 the lack  of the reauthorization was -                                                              
we had testimony that it was unintended.  That was conveyed to the                                                              
different  utilities   through  the  Commission  itself,   to  the                                                              
financial  markets that  that was completely  unintended  and that                                                              
there  was a  commitment to  reauthorize immediately  at the  next                                                              
legislative  session, which  was  done. So  as far  as a  seamless                                                              
transition,  it seems like  that dynamic  is completely  different                                                              
than  you saying  well, let's  put them  into sunset  and if  they                                                              
don't perform or if we can't get  all of these things, we're going                                                              
to do  what? Terminate  them? Your own  testimony says  that's not                                                              
what you  want to  do so why  would you push  things right  to the                                                              
brink? I just don't understand why  - and I guess I place a lot of                                                              
credibility on the  testimony that we had in Anchorage  again from                                                              
the gentleman  from APU  who said we  really need to  separate the                                                              
two.  Reauthorization   for  a  shorter  time  period   should  be                                                              
separated and  depoliticized from  the statutory changes  that are                                                              
necessary.                                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR: Was there a question in there?                                                                                 
                                                                                                                                
SENATOR THERRIAULT: I'm not sure.                                                                                               
                                                                                                                                
SENATOR DONLEY: Mr. Chairman?                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Go right ahead Senator Donley.                                                                                 
                                                                                                                                
SENATOR  DONLEY: First  of all,  ballpark, how  many members  does                                                              
Chugach have?                                                                                                                   
                                                                                                                                
MR. GRIFFITH:  We have 70,000 points  of service and  about 58,000                                                              
members  that  we directly  serve  on  the  retail side.  We  also                                                              
provide service to major wholesale  customers and one smaller one,                                                              
namely  Matanuska Electric,  Homer Electric,  the Seward  electric                                                              
system and we sell economy energy to Golden Valley in Fairbanks.                                                                
                                                                                                                                
SENATOR DONLEY:  Thanks. Just so  the committee knows, I'm  one of                                                              
the 58,000 - I've been a member for  18 years. I'm not convinced -                                                              
I think you made  a good case as to why not  extend the Commission                                                              
so I  do think you  gave justification, from  my point of  view. I                                                              
understand Senator  Therriault said  you didn't. That's  his point                                                              
of view. My point of view is you  gave reasonable justification as                                                              
far as  the wind-down of  the APUC from  the past. Boy,  you know,                                                              
I've been  around here a long  time and sometimes I'm  just amazed                                                              
how things get represented by a few  people and then they become a                                                              
deal. I  mean, especially  over the last  few years, I  keep being                                                              
told of all of these deals on different  funding sources and deals                                                              
that I  was never  informed of  or participated  in. I,  you know,                                                              
whether  the financial  markets were informed  that the  wind-down                                                              
year,  back  in whatever  it  was,  was unintended,  that  doesn't                                                              
necessarily -  it's just  not that persuasive  to me  because I've                                                              
seen  people make  up subsequent  deals. I've  been victimized  by                                                              
subsequent  deals that  weren't there  that the  budget and  audit                                                              
committee just changed the budget  and it was done intentionally a                                                              
certain way so, whether it was intended  or not intended is in the                                                              
eye of the beholder and the individual legislator at the time.                                                                  
                                                                                                                                
The fact is, it  functioned well into that year and  so I do think                                                              
you  made  a  reasonable  case  and I  do  think  that  there's  a                                                              
necessity for  some sort of time  certain and that was  one of the                                                              
whole  reasons  behind  the  original  sunset  law.  I  think  the                                                              
terminology  that's used  in the existing  statute is  unfortunate                                                              
and  I think  it's  been  around for  a  long time  and  obviously                                                              
anybody  thinks there's  something terminating  they go away.  But                                                              
that  isn't what  really  happens in  the  existing statute.  They                                                              
don't go away. They  still hang around for a year  and continue to                                                              
do business  and they've  got tons of  legal opinions  saying they                                                              
have full  legal authority  to accept new  cases and handle  it so                                                              
even though  the word  'terminate' is used  in the statutes,  it's                                                              
not what I think  any common English language  explanation of what                                                              
'terminate' means  would be in reality  but I just said  that I do                                                              
think  you  gave  a  legitimate reason.  I'm  not  saying  that  I                                                              
particularly  support that  course of  action, but  I thought  you                                                              
gave a good reason. Thank you Mr. Chairman.                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR: I'll  ask a question.  Joe,  you were here  when                                                              
this took place in 1994?                                                                                                        
                                                                                                                                
MR. GRIFFITH: Correct.                                                                                                          
                                                                                                                                
CHAIRMAN  TAYLOR: Did  somebody  tell you  that  failure to  early                                                              
extend in 1994  was an unintended act by the  legislature and that                                                              
everybody was  assured this was going  to be taken care  of in the                                                              
next year? Did you hear that information?                                                                                       
                                                                                                                                
MR. GRIFFITH: '94 was a long time  ago for an old guy to remember.                                                              
I think I heard  the words that it was some kind  of an oversight,                                                              
a mistake, that it didn't get reauthorized.  I heard nothing about                                                              
notifying of  the markets or the  rating agencies or any  of those                                                              
folks. I think I  would have heard that because I  was the CFO for                                                              
Chugach  at  the  time  and  had   an  ongoing  dialogue  with  my                                                              
financiers that  I maintained virtually  on a weekly  basis. There                                                              
were some  questions  from rating  agencies of  what's going  on -                                                              
what  is this?  We answered  them  and that  was the  end of  that                                                              
discussion. This  time though  I haven't even  had the  calls from                                                              
rating agencies yet.                                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR: You  see, I was majority leader  in the Senate at                                                              
the time and  I had 10 years  of service in between the  House and                                                              
the Senate. I was  part of the leadership at that  time and making                                                              
decisions as  to what bills were  going to pass and  weren't going                                                              
to pass.  You know  something? I've  got no  recollection of  this                                                              
unintended  action taking  place  but there's  always  revisionist                                                              
history, I  guess, around  here but maybe  I'm like you,  Joe, I'm                                                              
getting a little too old to remember.                                                                                           
                                                                                                                                
SENATOR DONLEY: Mr.  Chairman, just to be fair,  I remember people                                                              
saying that  it was  unintended but  I don't  - just because  some                                                              
people  say that  doesn't  make it  true,  just  like some  people                                                              
saying -  oh we  had a deal  to continue  to fund this  particular                                                              
budget item at a certain level - doesn't make it the truth.                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: I [indisc.] if there  is any recollection of this                                                              
having some  impact because it has  a metal edge that did  have an                                                              
impact and  that we're in a  different scenario today, if  that in                                                              
fact is the case  I wasn't aware of it either  Joe. Thank you very                                                              
much. Are there further questions?                                                                                              
                                                                                                                                
MR. GRIFFITH: Senator, thank you.                                                                                               
                                                                                                                                
CHAIRMAN  TAYLOR: Apparently  - do  we  still have  quite a  crowd                                                              
standing out there  in the hall? I was concerned  that we were out                                                              
of chairs and this thing was too  cramped and we could move to the                                                              
other room because  we get a lot  of road noise off this  - it may                                                              
be difficult  to hear for  you people.  Are there people  who have                                                              
not yet testified? Yes sir. Would  you come forward? Eric, did you                                                              
wish to testify next?                                                                                                           
                                                                                                                                
[Inaudible response.]                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR:  I wanted to take  those people first and  then I                                                              
wanted to get  to GCI because I  have some questions for  them and                                                              
for the Commission. Go ahead.                                                                                                   
                                                                                                                                
10:58 a.m.                                                                                                                      
                                                                                                                                
MR.  WES  CARSON:  Mr.  Chairman,   I'm  Wes  Carson  from  Alaska                                                              
Communication  Systems. I  appreciate the  opportunity to  be with                                                              
you. I  do have  written testimony  that I'd  like to submit  and,                                                              
with  the committee's  permission,  would like  to  share some  of                                                              
these comments.                                                                                                                 
                                                                                                                                
CHAIRMAN  TAYLOR:  We have  a  staffer  here right  now  [indisc.]                                                              
copied.                                                                                                                         
                                                                                                                                
MR.  CARSON:  Mr.  Chairman, with  regards  to  the  legislature's                                                              
consideration...                                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: Just to remind you,  you were sworn under oath in                                                              
Anchorage when you gave a brief statement.  Then you went down for                                                              
your son's wedding, if I remember right.                                                                                        
                                                                                                                                
MR.  CARSON: I  did  and it  was  very nice.  With  regard to  the                                                              
legislature's  consideration of  the  proposed reauthorization  of                                                              
the Regulatory  Commission of Alaska, we again  state emphatically                                                              
our  belief that  the regulatory  status quo  is unacceptable.  We                                                              
have serious concerns  about how the regulatory  processes and the                                                              
substantive decisions are affecting  the long term public interest                                                              
of  Alaskans, as  well as  the economic  strength  of the  state's                                                              
regulated  utilities. Our  concerns,  and those  expressed by  any                                                              
other  utilities  throughout  Alaska,  must be  addressed  by  the                                                              
legislature in a thorough and comprehensive  manner before the RCA                                                              
is  reauthorized.  Attached  to  my  written  testimony  are  some                                                              
outlines  of  substantive  and procedural  issues  that  we  would                                                              
suggest be included in that review.                                                                                             
                                                                                                                                
As we did in  Anchorage, we'd like to just take  a moment and talk                                                              
about  the  four  ACS local  telephone  companies  that  serve  75                                                              
percent of  the access lines, or  the customers, in the  state and                                                              
those companies  are ACS  of Anchorage  - the  former ATU,  ACS of                                                              
Fairbanks  - the former  FMUS, ACS  of Alaska  serving Juneau  and                                                              
several other communities,  and ACS of the Northland  which serves                                                              
our most high cost areas.                                                                                                       
                                                                                                                                
We believe  that the RCA has  purported to simply  implement state                                                              
and federal law  and regulations and to take its  policy direction                                                              
from the legislature  but we believe they create  their own public                                                              
policy and legal interpretations  where necessary to support their                                                              
positions.  And  we   contend  that  the  RCA   seeks  to  promote                                                              
competition in local telephone at  any cost, in particular to ACS,                                                              
but, in the long  term, in the interests of  the Alaskan consumer,                                                              
and  the  rural  Alaskan  consumer in  particular,  and  we  would                                                              
suggest  a couple  of examples  to support  our view.  One is  the                                                              
Anchorage Interconnection Agreement.                                                                                            
                                                                                                                                
This agreement  between GCI and  the old ATU, Anchorage  Telephone                                                              
Utility, was one of the first in  the nation - was approved by the                                                              
Alaska   Public  Utilities   Commission  in   January,  1997.   It                                                              
established   the  terms  for   local  telephone  competition   in                                                              
Anchorage, including  the rate at  which GCI would lease  from ATU                                                              
the  unbundled network  element loop  -  UNE loops,  which is  the                                                              
telephone circuit  or line connecting  the customer to  the public                                                              
switch telephone network.                                                                                                       
                                                                                                                                
In 1997,  in an order,  the APU established  a temporary  UNE loop                                                              
rate of $13.85.  It was intended  as a short term  substitute, one                                                              
that would  be finally  replaced  by one done  in compliance  with                                                              
federal law. In  the Commission's own words, quote,  all prices in                                                              
the arbitrated  interconnection agreement are temporary  in nature                                                              
and will require a full study based  upon a cost methodology to be                                                              
determined by this Commission at a later date, end quote.                                                                       
                                                                                                                                
ACS of  Anchorage as the  successor to  ATU sought, but  failed to                                                              
obtain, an agreement  with GCI for new cost based  rates. ACS then                                                              
asked the RCA to set new rates in  compliance with the federal law                                                              
of January,  2000, arguing  that the then  three year old  rate of                                                              
$13.85 was so  low as to effectively force ACS  to subsidize GCI's                                                              
competing    local    telephone    service.    Undoubtedly    this                                                              
noncompensatory rate, which gives  GCI a significant cost of goods                                                              
advantage over ACS,  has contributed to making  Anchorage the most                                                              
competitive local  telephone market in the nation.  It explains in                                                              
part the  remark made  by RCA Chair  Nan Thompson  in a  speech on                                                              
July 30, 2001 at the Anchorage Chamber  of Commerce when she said,                                                              
quote, My colleagues on other state  commissions are astonished to                                                              
hear  that a  competitor  has captured  35  to 40  percent of  the                                                              
Anchorage market, close quote.                                                                                                  
                                                                                                                                
The RCA  on March 6, 2000,  opened a docket  to set new  rates and                                                              
expressly recognized  that the existing  rates for  both temporary                                                              
and  quote,  not  based  upon an  accepted  forward  looking  cost                                                              
methodology, close quote. Nevertheless,  the RCA took no action on                                                              
the open  docket and finally, a  year and a half  after requesting                                                              
new  forward  looking  rates  with no  resolution  in  sight,  ACS                                                              
requested a new temporary rate. The  RCA held a hearing during the                                                              
latter part  of 2001,  in which ACS  submitted extensive  evidence                                                              
supporting a  UNE loop  rate of $24.00.  ACS requested  an interim                                                              
and refundable loop rate increase.  This means that in the event a                                                              
finally  adjudicated rate  was  less than  the  interim rate,  ACS                                                              
would refund to  GCI any overpayment, thereby  protecting GCI from                                                              
economic harm. On the other hand,  if the interim rate was set too                                                              
low and the finally  adjudicated rate was higher  than the interim                                                              
rate, ACS may  have no recourse to collect the  underpayments from                                                              
GCI.                                                                                                                            
                                                                                                                                
At  the  hearing,  GCI's  counsel   made  an  oral  representation                                                              
unsupported by any  cost studies submitted in  connection with the                                                              
hearing that  their models could  not justify a rate  greater than                                                              
$14.92.  The  RCA agreed  with  GCI  despite  the absence  of  any                                                              
supporting  evidence  and  issued  an order  granting  an  interim                                                              
refundable  rate   of  $14.92.  So,  two  and   half  years  after                                                              
requesting new rates in compliance  with federal law, and five and                                                              
a half  years  after initiating  interconnection competition,  ACS                                                              
still has  never had  an Anchorage  UNE loop  rate established  in                                                              
compliance  with federal  law. In  fact,  ACS has  been unable  to                                                              
obtain  even a  schedule  for resolving  this  matter  and as  our                                                              
submitted  cost   studies  would   indicate,  we're   receiving  a                                                              
noncompensatory rate for UNE loops.                                                                                             
                                                                                                                                
A second example  is the termination of the ACS  rural exemptions.                                                              
As we've  talked about before,  telephone companies  classified as                                                              
rural  or, in  other  words,  serving a  high  cost  area, by  the                                                              
Telecom  Act   of  1996   are  exempt   from  the  obligation   to                                                              
interconnect their  network and lease loops to  their competitors.                                                              
State  commissions  can  terminate  a  rural  exemption  but  only                                                              
according to  the Act, if that  state commission finds that  it is                                                              
technically feasible,  not unduly economically burdensome,  and we                                                              
would be  consistent with preserving  universal service to  do so.                                                              
The Act recognized  the fragile economics of most  rural telephone                                                              
companies.                                                                                                                      
                                                                                                                                
GCI requested, in  1997, that the APUC terminate  rural exemptions                                                              
for Fairbanks,  Juneau, and several  other ACS rural  territories.                                                              
The APUC  placed the  burden of proof  on GCI  and found  that the                                                              
economics   of  interconnection   competition   would  be   unduly                                                              
burdensome on these  companies. The APUC therefore  ruled that the                                                              
exemption  should be  preserved. GCI  appealed the  order and  the                                                              
Alaska Superior Court remanded the  case back to the APUC with the                                                              
instruction to  place the burden on  ACS. The APUC did...  [END OF                                                              
TAPE].                                                                                                                          
                                                                                                                                
[The following  portion of Mr.  Carson's testimony was  taken from                                                              
written testimony.]                                                                                                             
                                                                                                                                
...so, then terminated  the rural exemptions of  the ACS companies                                                              
and  ordered  interconnection  with  GCI  on June  30,  1999.  ACS                                                              
appealed the  APUC's decision to  the new RCA. Without  a hearing,                                                              
the  RCA sustained  the termination  of the  rural exemption.  ACS                                                              
                                               th                                                                               
appealed the  termination. In July 2000,  the 8  Circuit  Court of                                                              
Appeals, in  a decision  that was binding  on all other  circuits,                                                              
held that the burden  of proof must be on the  competitor, not the                                                              
rural  telephone company,  and the  economic burden  on the  rural                                                              
telephone company associated with competitive...[END OF SIDE A]                                                                 
                                                                                                                                
TAPE 02-45, SIDE B                                                                                                            
                                                                                                                                
MR.  CARSON: ...entry  must be  considered. Obviously  recognizing                                                              
that the  rural exemption terminations  had been done in  a manner                                                              
contrary  to federal  law, GCI  appealed  the matter  to the  U.S.                                                              
Supreme  Court  to  review  the  8   Circuit's  rulings  on  these                                                              
specific issues.  The U.S. Supreme  Court denied the  GCI request,                                                              
              th                                                                                                                
leaving the  8  Circuit decision  on these matters the  law of the                                                              
land.                                                                                                                           
                                                                                                                                
Yet the  RCA refused to  comply with  the law, stating  quote, The                                                              
 th                                                                                                                             
8   Circuit's ruling on the  assignment of the burden  of proof in                                                              
a rural exemption proceeding does  not persuade us to revisit that                                                              
issue  here,  close  quote. This  was  a  clear  case of  the  RCA                                                              
ignoring  the federal  law that  did  not comport  with their  own                                                              
policy to force competition in rural areas.                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Let  me interrupt you there, Wes.  Is that matter                                                              
now on appeal?                                                                                                                  
                                                                                                                                
MR.  CARSON:  Yes sir,  it  is.  It's pending  before  the  Alaska                                                              
Supreme Court.                                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: And why is it on appeal?                                                                                       
                                                                                                                                
MR. CARSON: Because ACS appealed the matter.                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  Why were  you forced to  appeal the  decision by                                                              
     th                                                                                                                         
the 8 Circuit to our Supreme Court?                                                                                             
                                                                                                                                
MR. CARSON:  We had  requested reconsideration  by the  Regulatory                                                              
Commission of Alaska. They declined to do so.                                                                                   
                                                                                                                                
CHAIRMAN  TAYLOR: Let  me  clarify  that. You  made  a motion  for                                                              
reconsideration and  you lodged that with the  Commission. Did the                                                              
Commission give you a hearing on  reconsideration or were you just                                                              
summarily denied?                                                                                                               
                                                                                                                                
MR.  CARSON: My  recollection is  that  we were  denied, at  which                                                              
point we filed with the Superior Court.                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: Well,  that's the route you have  to go. You have                                                              
to go  first to the  Superior Court and  then on to  the Supremes.                                                              
                                   th                                                                                           
But in  applying -  after - this  8   Circuit decision,  the panel                                                              
here has heard a great deal about  it, it seems to me that that is                                                              
a major shift, or at least a major  declaration of what the status                                                              
of  the federal  law is  and -  are you  telling us  that the  RCA                                                              
refused to hold a hearing even on  reconsideration? That they just                                                              
summarily said  no, we're  not going to  listen to you,  we're not                                                              
even going  to take it  up, we don't  want to hear  anything about                                                              
it?                                                                                                                             
                                                                                                                                
MR. CARSON:  Yes, Mr. Chairman.  In fact, we  went to the  FCC and                                                              
explained  our  situation  and  the common  carrier  bureau  in  a                                                              
decision in a matter indicated that  there was no need for them to                                                              
                            th                                                                                                  
issue a  rule because  the 8   Circuit was clear  and the  FCC was                                                              
bound to follow it.                                                                                                             
                                                                                                                                
CHAIRMAN  TAYLOR:  Right.  You're  not  having a  problem  on  the                                                              
                                                       th                                                                       
federal  side  because   the  feds  do  respect  the  8    Circuit                                                              
decision, right?                                                                                                                
                                                                                                                                
MR. CARSON: That's correct.                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Now  how long do you think it's  going to take to                                                              
work on through  to the Alaska Supreme  Court so you can  get some                                                              
finality on this where the RCA will  finally be ordered one way or                                                              
                                     th                                                                                         
the other,  to either abide  by the 8   Circuit decision or  to do                                                              
their own thing, I guess?                                                                                                       
                                                                                                                                
MR.  CARSON:  We anticipate  perhaps  by  fall  of this  year  the                                                              
Supreme  Court  may  rule  on  the  matter  but  what's  really  a                                                              
difficulty for us  is if, in fact, the rural  exemptions have been                                                              
improperly  terminated,  we  are  losing market  share  and  we're                                                              
losing revenues  in a manner  that was accomplished  in a -  not a                                                              
lawful way and I  don't know how, as we continue  to let this roll                                                              
out, we  can ever be  made completely  whole for that.  That's why                                                              
there's  urgency to  us in this  whole matter  because we  believe                                                              
there have been  actions taken inconsistent with  federal law that                                                              
are damaging to us economically and  until we get some resolution,                                                              
we're at a loss with no way to recover.                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: Go right ahead.                                                                                                
                                                                                                                                
MR. CARSON: The  RCA also terminated the exemption  for ACS's most                                                              
rural company,  ACS of the  Northland, despite GCI's  testimony in                                                              
1997 and  again in 1999 that  it was seeking interconnection  only                                                              
in North  Pole, not in these  other territories. We  don't believe                                                              
any specific evidence  was entered into the record  to support the                                                              
notion that  the petition  would not  be economically  burdensome,                                                              
nor that it would not jeopardize  universal service. Declaring its                                                              
intent  that the  rural exemption  be terminated  for these  small                                                              
communities,  the RCA  said, quote,  We have  a responsibility  to                                                              
carry   out   the    intent   of   Congress   in    adopting   the                                                              
Telecommunications  Act of 1996,  which is to require  competition                                                              
in  the  provision of  local  telecommunications  services,  close                                                              
quote.                                                                                                                          
                                                                                                                                
We contend  that the RCA has  the responsibility to carry  out the                                                              
full intent of  the Act, not just the provisions  that support the                                                              
commission's  own agenda. The  Act permits  a state commission  to                                                              
terminate  a  rural exemption  only  if  there is  an  affirmative                                                              
finding that  it will  not be unduly  economically burdensome  and                                                              
that it  will not jeopardize  universal service. We  don't believe                                                              
there was  such a  finding in  the case  of the so-called  Glacier                                                              
State properties.                                                                                                               
                                                                                                                                
A  point   on  interconnection   agreements  that  transpired   in                                                              
Fairbanks  and Juneau  -  as a  result  of terminating  the  rural                                                              
exemption,  ACS was  compelled to  permit  interconnection in  our                                                              
networks there  and to lease  UNE loops to  Fairbanks - to  GCI in                                                              
Fairbanks and Juneau.  In sharp contrast to the  dilatory handling                                                              
of the  ACS request  for legal  loop rates  in Anchorage,  the RCA                                                              
very promptly set rates for Fairbanks  and Juneau in response to a                                                              
request  from GCI.  The actual  ACS cost  for an  average loop  in                                                              
Fairbanks  is  about  $33.50,  and  that  is  based  on  the  cost                                                              
information  we provide  federally  to receive  universal  service                                                              
support. The  RCA set a  UNE loop price  for Fairbanks  of $19.19,                                                              
giving GCI  a cost  of goods that  is just 57  percent of  the ACS                                                              
cost.                                                                                                                           
                                                                                                                                
At the  time it terminated  the rural  exemptions, the  RCA stated                                                              
that  quote, Negotiations  regarding appropriate  UNE pricing  can                                                              
achieve an acceptable  level of economic impact,  close quote, and                                                              
promised  that it  would  play a  continuing  supervisory role  to                                                              
ensure  that,  quote,  Economic burdens  borne  by  the  incumbent                                                              
carrier in  a market where  local competition is  newly introduced                                                              
are  not too  great, close  quote.  The company  testified in  the                                                              
Fairbanks  rural exemption  proceeding  that  economic harm  would                                                              
result  from a UNE  loop rate  as low  as $27.30.  The RCA  flatly                                                              
rejected  the company's  argument about  economic harm,  declaring                                                              
that  that  UNE  price -  this  is  a  quote, that  UNE  price  is                                                              
unrealistically low, close quote. The RCA then...                                                                               
                                                                                                                                
SENATOR  DONLEY:   Wes,  I  read  that  part   already.  I  didn't                                                              
understand that. ACS  said if it was below $27.30  it would hurt -                                                              
they'd  be losing money  on providing  that service.  And then  it                                                              
says  the  RCA   flatly  rejected  the  company's   economic  harm                                                              
argument, and  then it says declaring,  quote, that the  UNE price                                                              
is  unrealistically   low.  That  seems  contradictory   with  the                                                              
rejection of  the 27.30  unless they're  saying that we  recognize                                                              
the earlier set price was low, but  the 27.30 is too high. It just                                                              
seems - I'm not following it well.                                                                                              
                                                                                                                                
MR. CARSON: Senator, basically what  the RCA said in the order was                                                              
that you would  expect the rural company to offer,  as an example,                                                              
a very  low UNE  rate so that  they could  show economic  harm. We                                                              
used a rate of  27.30 and demonstrated what the harm  would be and                                                              
they said that  we don't accept that  27.30 would really  be a UNE                                                              
rate. We  think that's unrealistically  low. So, in  rejecting the                                                              
economic  harm argument,  they said  that our  example of $27  was                                                              
unrealistically low,  implying that the  UNE rate would  be higher                                                              
than $27.30.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  And then they came  up with a rate that  was, in                                                              
fact, lower than the 27...                                                                                                      
                                                                                                                                
MR. CARSON: $19.19 - about two-thirds.                                                                                          
                                                                                                                                
SENATOR DONLEY: I'm having a really  hard time understanding that.                                                              
                                                                                                                                
MR. CARSON: We  have a hard time understanding  that too, Senator.                                                              
And basically -  I'm repeating myself but - we  offered an example                                                              
to demonstrate the kind of economic  harm that would result from a                                                              
$27 UNE rate.                                                                                                                   
                                                                                                                                
SENATOR  DONLEY: Is  there some  difference in  the criteria,  the                                                              
federal criteria, for - in our earlier  hearings I was starting to                                                              
- I thought that the UNE rate - is  there some dichotomy there I'm                                                              
not  understanding?  They're  using  it  for  different  types  of                                                              
functions?                                                                                                                      
                                                                                                                                
MR. CARSON:  I don't  believe so Senator.  When you establish  the                                                              
rate for the unbundled network element  loop, that is the rate for                                                              
interconnection.                                                                                                                
                                                                                                                                
SENATOR DONLEY: Okay. I'm sorry to  interrupt you. I was just - it                                                              
was not - it didn't make sense to me.                                                                                           
                                                                                                                                
MR. CARSON: I'm sorry that wasn't clear.                                                                                        
                                                                                                                                
SENATOR  DONLEY: No,  I guess  it's  clear. It  just doesn't  make                                                              
sense.                                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: Does everybody understand  that now? They came in                                                              
with a rate  of 27 bucks. The  Commission said that's far  too low                                                              
to be  justifiable. Then  the Commission comes  in with a  rate of                                                              
about $19. Go ahead.                                                                                                            
                                                                                                                                
MR. CARSON: This  is another example of the RCA  following its own                                                              
policy  agenda  and,  in  effect,   determining  to  grant  GCI  a                                                              
competitive  advantage  as  they   had  in  Anchorage  to  try  to                                                              
replicate the  competition in that  market. Further,  to establish                                                              
the loop rate, the RCA rejected ACS's  model that was based on our                                                              
actual cost  to build - our  actual forward looking cost  to build                                                              
and instead  elected to set prices  based on an  improper economic                                                              
model and using inputs or, in other  words, cost data that was not                                                              
our cost data but rather based on Lower 48 companies.                                                                           
                                                                                                                                
SENATOR DONLEY: Can we talk about  that a minute because I want to                                                              
- getting on a  roll here but... This model issue  - I guess other                                                              
than what  variables you  plug into the  model, it seems  like the                                                              
big public  policy issue  here surrounding  it  - not the  biggest                                                              
level  of   consideration  but  one   of  the  medium   levels  of                                                              
consideration actually  is whether it's a forward  looking rate or                                                              
an actual cost  rate. Can you explain  to me what your  opinion is                                                              
what  the law  says  the rate  ought  to be  based  on because  in                                                              
reading  materials   from  other  people  involved   in  all  this                                                              
discussion, they're  saying that the federal law  requires that it                                                              
be  a forward  looking  rate  that would  be  based  on this  most                                                              
efficient  supplier  criteria  and  then that's  what  your  model                                                              
should be targeted to get to. Do you understand what I'm asking?                                                                
                                                                                                                                
MR. CARSON: I believe I do, Senator.                                                                                            
                                                                                                                                
SENATOR DONLEY: Okay.                                                                                                           
                                                                                                                                
MR. CARSON:  I think it's  because there  are two terms  that have                                                              
been used. One  is forward looking economic cost  and the other is                                                              
this  TELREC -  the total  element  long run  economic cost.  It's                                                              
clear that  the law says when you  price the cost of  the loop for                                                              
the competitor  or other  elements  in the network,  it should  be                                                              
based on  what it would  cost to build  it going forward,  not the                                                              
old historic  imbedded cost of the  plant that's currently  in the                                                              
ground.                                                                                                                         
                                                                                                                                
SENATOR DONLEY: Okay. So you agree with that?                                                                                   
                                                                                                                                
MR. CARSON: Well I agree - yes I  agree with that but that doesn't                                                              
answer the  specific question  of the  cost input  you use  so, in                                                              
other words, if you want to ask...                                                                                              
                                                                                                                                
SENATOR DONLEY: Oh I think I - let  me try because if I try - it's                                                              
kind of like the Socratic method   - maybe I'll get it, right? So,                                                              
your contention is while you recognize  that it should be based on                                                              
the forward looking cost, the best  way to establish the variables                                                              
that  go into  the model  that create  the  forward looking  costs                                                              
should  be based  on  your past  experience  of  what those  costs                                                              
actually were. Is that it? How am I doing?                                                                                      
                                                                                                                                
MR. CARSON:  Not exactly. I would  say that it should be  based on                                                              
what's our  current bid for fiber  optics, what's our  current bid                                                              
for copper,  what's our current labor  rate. So, if we  were to go                                                              
out  today and  build this  most efficient  network, assuming  our                                                              
wire centers  are where they are,  and building up  this efficient                                                              
network,  that  you  would  use the  actual  cost  if  we  started                                                              
building today. What would it actually cost us to build that?                                                                   
                                                                                                                                
SENATOR  DONLEY: Okay.  All right.  Let me  ask somebody,  because                                                              
this was another  area that we got  into just a little  bit in the                                                              
earlier hearings.  The labor  cost variable -  I've been  told the                                                              
model had  the Lower 48 model,  this synthesis model  was modified                                                              
for Alaska by  adding something like 33 percent to  the labor cost                                                              
and it was different for the different  communities in Alaska. Was                                                              
your contention  from - I mean you  ought to know what  the actual                                                              
labor costs are  because you're paying people right  now for doing                                                              
this - right? Was that low or was  that 33 percent adequate or was                                                              
it high  or - what  was your opinion  about the labor  variable in                                                              
the model?                                                                                                                      
                                                                                                                                
MR.  CARSON:  I  don't  remember  exactly  what  the  final  labor                                                              
variable was  in the  model but the  notion of  taking a  Lower 48                                                              
rate  for anything,  be it  labor  or materials  or supplies,  and                                                              
simply putting  a cost of  living differential for  Alaska doesn't                                                              
represent our costs.  I could go back, Senator, and  submit to you                                                              
- I could go back and pull out that information.                                                                                
                                                                                                                                
SENATOR DONLEY: I'm  curious about that, you know,  because that's                                                              
one element I can really relate to and understand.                                                                              
                                                                                                                                
MR. CARSON: I would be happy to provide that.                                                                                   
                                                                                                                                
SENATOR DONLEY: Okay. Thank you Mr. Chairman.                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Go right ahead.                                                                                                
                                                                                                                                
MR. CARSON:  Exacerbating  the economics  of competition  in these                                                              
high cost markets,  the RCA also issued an order  granting GCI the                                                              
right  to receive  federal  universal  service funds  subsidy,  so                                                              
called  eligible telecommunications  carrier  status, ETC  status,                                                              
the vast  majority of  which is specifically  intended  by federal                                                              
law  for the  construction  and maintenance  of  the loop  itself,                                                              
although  GCI isn't  actually building  or  maintaining the  loop.                                                              
When they lease the loop, we still  build it and we still maintain                                                              
it so, to us, we  do this as a windfall to GCI  granted by the RCA                                                              
and the  end result  is, again,  to discourage  investment  by the                                                              
incumbent  carrier and  also to  divert federal  funding from  its                                                              
intended purpose to construct and  maintain loops, to effect, line                                                              
the pockets of the competitor.                                                                                                  
                                                                                                                                
CHAIRMAN  TAYLOR: Let  me interrupt  you there.  Are you aware  of                                                              
that type of transfer of funding  out of what the feds intended it                                                              
for over  to this? Is  that going on in  any other state  that you                                                              
are aware of?                                                                                                                   
                                                                                                                                
MR. CARSON:  I am aware that  there are other hearings  where this                                                              
so-called ETC status  is being considered. One  of the significant                                                              
issues now on the federal level is  whether to grant ETC status to                                                              
wireless  carriers  who  are, in  fact,  offering  an  alternative                                                              
technology, not just riding the incumbent's  network. So the issue                                                              
is current  and it is one we  have spoken to officials  at the FCC                                                              
about. They're  also concerned  about many  issues of ETC  status,                                                              
one of which is that in this particular  interest, the competitive                                                              
local exchange carrier,  GCI in this case, received  its USF based                                                              
on the incumbent [indisc.], ACS's  cost, not their own cost, which                                                              
is  a  peculiar  result  because  on  the  federal  level,  if  an                                                              
incumbent  carrier  doesn't  have  costs  of 115  percent  of  the                                                              
average  loop  in  the United  States,  they're  not  eligible  to                                                              
receive  these funds.  The average  loop cost  this year is  about                                                              
$20, which  means if your actual  cost is not at least  23, you're                                                              
not eligible.  The UNE  loop rate  is $19.19 so  GCI's cost  for a                                                              
loop is less  than what an  incumbent carrier has to  establish to                                                              
even be  eligible, which  is a  peculiar anomaly  that the  FCC is                                                              
aware of  and probably will be  investigating this year,  based on                                                              
information we've received.                                                                                                     
                                                                                                                                
SENATOR DONLEY:  This is - you know,  I mean - we're  hearing your                                                              
point of view. This  is the kind of question I'd  just like to ask                                                              
the Commission  why did you do  that. Is this something  that's an                                                              
ongoing case  that you can't talk  about or is it  something we're                                                              
going to be able to ask you later?                                                                                              
                                                                                                                                
11:22 a.m.                                                                                                                      
                                                                                                                                
RCA  CHAIRWOMAN  NAN  THOMPSON:  There  is an  open  docket  about                                                              
granting  ETC wireless  status but  I'm  happy to  talk about  the                                                              
federal  rules  for  granting  ETC  status  and  the  rules  about                                                              
portability of  support to [indisc.].  So I could talk  about that                                                              
either now or later.                                                                                                            
                                                                                                                                
SENATOR DONLEY: All right. Well then  I won't ask you to speculate                                                              
because we'll be able to ask them. Okay.                                                                                        
                                                                                                                                
MR. CARSON: But I would just note  one of the issues that needs to                                                              
be addressed  is, is it in the  public interest to grant  such ETC                                                              
status and as -  I've talked about the cost of  our looping, about                                                              
$33.50, the cost  of GCI's loop is about $19.19 and  then when you                                                              
add the portable  USF, they will get about $10  per line, probably                                                              
three-quarters of that is directly  related to the maintenance and                                                              
support of the loop itself so ultimately  their cost of goods sold                                                              
is down around $10.                                                                                                             
                                                                                                                                
SENATOR DONLEY: And the initials are E-T-...                                                                                    
                                                                                                                                
MR. CARSON: ETC, eligible telecommunications carrier status.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: Don't  you have to own some copper  to do that? I                                                              
mean, isn't  this money intended to  maintain and keep up  and put                                                              
new  copper lines  into remote  places where  people wouldn't  get                                                              
universal services otherwise? I mean  isn't that the thrust of it?                                                              
                                                                                                                                
MR.  CARSON: Mr.  Chairman, that's  a primary  purpose. There  are                                                              
different elements  to USF.  There is  certainly one component  of                                                              
that that is for this high cost loop support, specifically.                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: But when you say  GCI's cost of loop, you're only                                                              
referring to what GCI, under the  RCA's order, is currently paying                                                              
you to rent and  use your loop that you built,  put in, maintained                                                              
and so on.                                                                                                                      
                                                                                                                                
MR. CARSON: That is correct.                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  They don't have  any cost other than  the rental                                                              
fee on  somebody else's loop,  but now they're  getting reimbursed                                                              
by the  federal government  as if they  owned and had  to maintain                                                              
their own copper loop.                                                                                                          
                                                                                                                                
MR. CARSON:  For a portion of  that, that's correct  Mr. Chairman.                                                              
They do  have other  costs associated  with the  provision  of the                                                              
entire service, switching  costs and other support  aside from the                                                              
loop  but  the  key  component is  that  loop  that  connects  the                                                              
customer to  the central  office and  the public switch  telephone                                                              
network.                                                                                                                        
                                                                                                                                
CHAIRMAN  TAYLOR: Since  these were rural  communities before  you                                                              
got exempted out by the RCA's action  on GCI's petition I assume -                                                              
right?                                                                                                                          
                                                                                                                                
MR. CARSON: Yes.                                                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: Before  that, there  is the  pass through  funds                                                              
that  we've  heard  a  lot  about   that  come  from  the  federal                                                              
government to make certain that universal  services are maintained                                                              
for the rural  carriers and we are also told  by the Commissioners                                                              
that  the commission  had to  certify  the amount  of money  being                                                              
expended by  each of the  rural carriers  and they had  to certify                                                              
and check on  that for the federal government and  then certify to                                                              
the feds that yes, this is the exact  amount being spent therefore                                                              
federal government  you can - we  can convey those $75  million to                                                              
rural carriers. Right?                                                                                                          
                                                                                                                                
MR. CARSON: Correct.                                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR: And  at what rate did the RCA  certify your rural                                                              
operations  in  North Pole,  Fairbanks,  Juneau  - if  you  could,                                                              
compare that  to the  current rate  - UNE  rate loop that  they've                                                              
gifted to GCI because they've got to be significantly different.                                                                
                                                                                                                                
MR.  CARSON: For  USF purposes,  USAC,  which is  the entity  that                                                              
administers that program,  looks at embedded cost and  that is the                                                              
historical  cost  of  putting  that  copper  in  the  ground.  Our                                                              
embedded cost is $33.51 as I recall.                                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR: They  certified that to  the federal  government                                                              
and you received pass through for it in previous years?                                                                         
                                                                                                                                
MR. CARSON: Well we actually submit that directly to USAC.                                                                      
                                                                                                                                
CHAIRMAN TAYLOR:  Okay. Whose - we've  been told that they  have a                                                              
certification  process  they have  to  go  through. In  fact,  the                                                              
Commission  has  threatened every  one  of these  small  utilities                                                              
with, gee,  we're not going  to be able to  get to it so  we might                                                              
not be able to do that for you this year.                                                                                       
                                                                                                                                
MR. CARSON: There is, in fact, a  certification process. That cost                                                              
information we provide directly to USAC.                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: So you provide the  cost information direct. Have                                                              
they ever come  out and said no,  those are phony costs  - they've                                                              
jacked them  up way too high  and we've got information  that says                                                              
contrary.                                                                                                                       
                                                                                                                                
MR. CARSON: No sir.                                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR: Is there a role  for them to play in that process                                                              
where they  do certify  what your  costs are  so that the  federal                                                              
money can flow?                                                                                                                 
                                                                                                                                
MR.  CARSON: I'm  not  exactly certain  of  the  specifics of  the                                                              
process,  Senator,  so that  would  be  better answered  by  Chair                                                              
Thompson.                                                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: Well  I'd rather  have it  answered by  somebody                                                              
like ARECA  or somebody else whose  daily business relies  upon it                                                              
because they probably understand  it very clearly. But, there is a                                                              
certification process  and I'm just  guessing at this  point those                                                              
numbers have to be different. And  I don't understand how they can                                                              
certify a  rate for the  feds to reimburse  at over here  and then                                                              
grab a  rate over  here that's maybe  50 percent  of that  for the                                                              
renting of  the very same  lines that  the year before  were rural                                                              
and were worth this much for federal pass through.                                                                              
                                                                                                                                
MR. CARSON:  That's one of the  anomalies that we're  dealing with                                                              
here - or the  contradictions, perhaps I should  say. For purposes                                                              
of universal  service, we're looking  at embedded costs,  which is                                                              
what  did you  really pay  to put  that  in that  ground, and  for                                                              
purposes of  the UNE interconnection  rate, we're looking  at this                                                              
TELREC,  or forward  looking,  economic cost.  But  to us,  that's                                                              
another  indication  that  as  the   Commission  considers  public                                                              
interest issues  and what  is in the  best interest from  a public                                                              
policy standpoint, that they have  to recognize that we have these                                                              
different parameters  there and somehow  find a reconciliation  to                                                              
make sure that what happens is fair  and even handed, continues to                                                              
provide an incentive  to invest and protects the  consumer so that                                                              
universal  service  funding  is  there  for  the  purpose  it  was                                                              
intended. I'm  sorry I  don't know the  specific details  of their                                                              
review. I  would be  happy to  make some  calls to the  regulatory                                                              
people and  be able  to provide you  with a  better answer  if you                                                              
wish, after a recess.                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: I'm hoping we can  get better information on that                                                              
but  I think  what you're  really telling  me is  it's apples  and                                                              
oranges.                                                                                                                        
                                                                                                                                
11:29 a.m.                                                                                                                      
                                                                                                                                
MR. CARSON: It is definitely apples and oranges.                                                                                
                                                                                                                                
CHAIRMAN TAYLOR:  It's a different  formula and a  forward looking                                                              
formula and so  on the federal side once you  get into competition                                                              
that they have  authorized by removing the rural  exemption but if                                                              
you stay  within the rural exemption,  then it's your  actual cost                                                              
of goods - what you paid for the  utility, how much it cost you to                                                              
put in  new copper, what  your actual labor  costs are and  so on.                                                              
That's the  amount you get  reimbursed based  upon by the  feds on                                                              
the pass  through and  somebody has to  certify that.  The strange                                                              
thing to me is  it's the very same group of  people certifying one                                                              
number - the next year deciding oh  no, now we're going to measure                                                              
you  on the  new formula  and it  just happens  to be  about a  50                                                              
percent cost advantage for one carrier. That's bizarre.                                                                         
                                                                                                                                
MR. CARSON:  And it is, Senator,  and that's why when you  look at                                                              
the  test  that  the  state commission  is  required  to  meet  in                                                              
terminating a  rural exemption, you  scratch your head  because on                                                              
one hand - two  key points - is it unduly  economically burdensome                                                              
on the  rural telephone company  and does it jeopardize  universal                                                              
service? If  the embedded cost is  $33.50 and you have  to sell it                                                              
for $19.19,  and then you're going  to lose the  universal service                                                              
funding support relative  to that line, how do you  pass that test                                                              
when  you seek  to terminate  a rural  exemption in  a place  like                                                              
Fairbanks  that is  high  cost by  definition?  So  that's why  we                                                              
believe there's  a serious policy  issue. Is what's being  done by                                                              
the Regulatory Commission in the  long term interest of the public                                                              
and the consumer  and we think not.  We think that these  kinds of                                                              
actions do jeopardize universal service to Alaskans.                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR:  Our questions  have  distracted  you from  your                                                              
testimony.                                                                                                                      
                                                                                                                                
MR. CARSON:  Our last  example is  the rate  case proceeding  that                                                              
we're  currently involved  in and  many  utilities have  expressed                                                              
concerns  about the  cost and  duration  of rate  cases. We  share                                                              
that.  Our  current  cases  were mandated  by  the  Commission  to                                                              
commence on  July 1,  2001 using  information from 2000  financial                                                              
results. We  anticipate rates now  sometime perhaps in  2003 based                                                              
on data that will then be about three  years old. Adjudicating the                                                              
matter has already  cost ACS about $1.8 million and  we expect the                                                              
full proceeding will  be at an expense to us of  about $3 million.                                                              
Earlier  this  month,  the  RCA   finally  issued  a  depreciation                                                              
decision in our rate case that appears  to be in conflict with the                                                              
Supreme Court's  decision this May  in Verizon versus FCC  in this                                                              
sense -  the U.S.  Supreme Court  criticized attempts to  minimize                                                              
depreciation and  slow depreciation  rates. Yet this  is precisely                                                              
what the  RCA has ordered.  The depreciation rates  established by                                                              
the RCA for ACS  of Anchorage, for the ACS companies  in fact, are                                                              
not only  much lower than the  rates employed by  its competitors,                                                              
but  they  appear  to  be  significantly   lower  than  any  other                                                              
telephone  utility in  Alaska  and, in  fact,  we believe  they're                                                              
lower  than any  other telephone  company  large or  small in  the                                                              
United States. This  is exactly the opposite result  from what one                                                              
would expect  in the  most competitive  marketplace in  the nation                                                              
where there's heightened  pressure to modernize  equipment or lose                                                              
customers.  The effect  of  this  decision will  be  to leave  ACS                                                              
burdened  with capital  tied up in  stranded, obsolete  facilities                                                              
while our competitors invest in newer facilities.                                                                               
                                                                                                                                
Many  utilities  have  expressed  fears  that  testifying  in  the                                                              
matters  of  the  reauthorization  of  the  RCA  could  result  in                                                              
retaliatory  rulings  by  the  Commission  in the  future  and  we                                                              
frankly wonder  if, perhaps, we're  not the first victim  based on                                                              
this order that we just received.  We believe the quid pro quo for                                                              
the  regulation   imposed  on  the   ACS  company  should   be  an                                                              
opportunity  to earn  a return on  our investment.  That would  be                                                              
fair but the  reality is that the  RCA can compel us  to build and                                                              
serve but we don't have a way to  ensure that we earn a return and                                                              
this Commission,  for example, claims sovereign  immunity when ACS                                                              
sought to have a matter under the  Telecom Act and specifically it                                                              
was  the  interconnection  agreements   in  Fairbanks  and  Juneau                                                              
reviewed by a federal district court.  We took the matter to court                                                              
as the  Telecom Act  provides we should  and they claim  sovereign                                                              
immunity. We  can't be reviewed.  Where's justice in that  kind of                                                              
an instance? And  I have to ask the question -  why wouldn't state                                                              
commissioners,  in  a matter  as  important  as these,  welcome  a                                                              
review to make  sure that their decisions are  consistent with the                                                              
law and fulfilling the public interest?                                                                                         
                                                                                                                                
SENATOR DONLEY:  Mr. Carson?  ACS went to  U.S. district  court in                                                              
Alaska?                                                                                                                         
                                                                                                                                
MR. CARSON: That's correct.                                                                                                     
                                                                                                                                
SENATOR  DONLEY:  And  did  the  U.S.  district  court  honor  the                                                              
sovereign immunity claim?                                                                                                       
                                                                                                                                
                                                  th                                                                            
MR. CARSON: They did  and we filed then with the 9   Circuit Court                                                              
of Appeals  where the matter is  still pending. And I  believe the                                                              
reason why the  federal district court did so is  because this was                                                              
                                    th                                                                                          
a matter that  was also before the 4   Circuit, as I  recall - the                                                              
matter of sovereign immunity.                                                                                                   
                                                                                                                                
SENATOR DONLEY: It's  just kind of intriguing as  an attorney to -                                                              
if  you have  a  state  agency complying  with  a federal  act,  I                                                              
understand sovereign immunity when  it deals with state government                                                              
internally  operating the  state  government,  but if  you have  a                                                              
state agency  that's complying  with a  federal act under  federal                                                              
mandate,  and  it's  specifically  in  the federal  act  that  the                                                              
federal courts have  jurisdiction over the issue, I  don't get the                                                              
sovereign immunity claim.                                                                                                       
                                                                                                                                
MR. CARSON:  I don't  get the  sovereign immunity  claim but  even                                                              
from  a  public  policy  standpoint,  I'm  just  puzzled  why  the                                                              
Commission  wouldn't welcome that  kind of  review by the  federal                                                              
district  court to  say  yes, in  fact  you are,  or  you are  not                                                              
complying with the federal law.                                                                                                 
                                                                                                                                
SENATOR DONLEY:  We do  have somebody from  the Department  of Law                                                              
here. I guess I can ask later what the basis of that was.                                                                       
                                                                                                                                
SENATOR THERRIAULT:  Quick question.  It was  under review  in the                                                              
 th                                                                                                                             
4   Judicial District  so there  had been  a lower court  decision                                                              
stemming from some  other state that sovereign  immunity did exist                                                              
in that instance or...?                                                                                                         
                                                                                                                                
MR. CARSON: I believe  a similar issue - I may  be incorrect but I                                                              
believe it  was Virginia. A similar  issue came up and  it went on                                                              
                                                   th                                                                           
to  the  Supreme Court  and  so  we believe  the  9   Circuit  was                                                              
waiting for that case to be processed through.                                                                                  
                                                                                                                                
SENATOR THERRIAULT: So - I'm sorry  - that Virginia one was at the                                                              
                               rd                                                                                               
Supreme Court level or at the 3 district?                                                                                       
                                                                                                                                
MR.  CARSON:  Yes, and  I  may  be incorrect  about  Virginia  and                                                              
perhaps  a  subsequent   witness  would  have   that  information.                                                              
Ultimately what  we're saying  is that the  Legislature has  to be                                                              
concerned about  the impacts of  these regulatory policies  on ACS                                                              
but, more importantly,  in the long run on Alaskan  consumers. ACS                                                              
has to be able to generate adequate  financial returns to continue                                                              
to construct and operate the modern  telecommunications facilities                                                              
needed to  keep Alaskans connected and  I can assure you  that the                                                              
capital markets are scrutinizing  the decisions of this Regulatory                                                              
Commission as they  review ACS. So, we have to have  access from -                                                              
up to  capital from these  markets if  we're going to  continue to                                                              
invest. We've  invested in these  networks with the hope  that the                                                              
RCA  would, through  our current  rate  case and  through the  UNE                                                              
proceeding in  Anchorage, permit us  to earn a reasonable  rate on                                                              
our  investment. Thus  far we've  been  disappointed. I  reference                                                              
again the  recent RCA  order reducing  our depreciation  rates. We                                                              
were seeking  a rate of  9.3 percent,  which is comparable  to our                                                              
primary  competitor's  depreciation  rate.  Interestingly  enough,                                                              
though, it was GCI arguing against  our depreciation rate, not the                                                              
RCA's  public advocacy  staff.  Staff relied  entirely  on GCI  to                                                              
formulate  a  position and  the  RCA  reduced  our rate  from  the                                                              
existing 7.8 percent  to 4.78 percent, which was  remarkably close                                                              
to the  GCI recommendation  of 4.49  percent. We  were at  7.8. We                                                              
asked for 9.3. We were reduced to 4.78.                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: So GCI was the intervener?                                                                                     
                                                                                                                                
MR. CARSON: They  were the intervener and, in fact,  they were the                                                              
ones that  carried the load  on behalf  of the Commission  in this                                                              
whole matter  so we  were having  to disclose  information  to GCI                                                              
relative to  our costs and then respond  to GCI in the  hearing as                                                              
they challenged us, brought forth  expert witnesses, and sought to                                                              
have  our   depreciation  rate  reduced.   There  is   perhaps  an                                                              
implication that  we're concerned  about the frequency  with which                                                              
the  RCA sides  with  GCI  and, in  fact,  that  is the  case.  We                                                              
reviewed Commission  decisions on  disputed issues before  the RCA                                                              
from  July 1999  to the  present and  in those  matters where  GCI                                                              
advocated a  position, the RCA ruled  in GCI's favor  81.3 percent                                                              
of the time. I suspect the Commissioners  would tell you that they                                                              
were only implementing the law, but  I believe an objective review                                                              
of such  matters as  the temporary Anchorage  UNE rate  that's not                                                              
based on a forward looking economic  methodology, the disregard of                                                              
     th                                                                                                                         
the 8   Circuit Court of Appeals ruling relative  to the burden of                                                              
proof in a rural exemption proceeding,  and the termination of the                                                              
rural exemption for  the ACS of the Northland  properties which we                                                              
claim there is no record supporting  the question of economic harm                                                              
or jeopardizing  universal service, suggests that  this Commission                                                              
doesn't always just apply the law.                                                                                              
                                                                                                                                
So, again,  we believe the  legislators must carefully  review the                                                              
current regulatory  regime before  reauthorizing the RCA  and they                                                              
must assure  that the state  regulation of utilities  promotes the                                                              
public interest  and that  every utility  receives fair  and open,                                                              
unbiased and rational treatment that  encourages future investment                                                              
in the  infrastructure. With regard  to our specific  concerns, we                                                              
would  ask that  the Legislature  consider  how it  is that  we're                                                              
going to continue  to have an incentive to invest  in the network,                                                              
particularly  in high  cost  rural  areas. This  is  a state  more                                                              
dependent upon  modern telecommunications than any  other state in                                                              
the  Union.  There's  great  urgency  for us.  The  RCA  has  made                                                              
significant decisions that have adverse  economic impact on us and                                                              
it's very  difficult for us  to remedy this  as time goes  on. For                                                              
example,  if  rural  exemptions   in  fact  have  been  terminated                                                              
contrary to federal law, and as competition  continues to roll out                                                              
on an  interconnection basis  in Fairbanks and  Juneau, how  do we                                                              
unwrap that and  be made whole for the losses  we've sustained. We                                                              
believe there's  no time for delay  and maintenance of  the status                                                              
quo is not acceptable.                                                                                                          
                                                                                                                                
So, if we could,  we have three recommendations  relative to going                                                              
forward and  that is  - one, immediately  establish a  legislative                                                              
oversight committee to monitor the  RCA's actions and to formulate                                                              
recommendations   for  consideration   in  the  2003   legislative                                                              
session.  The  charter  of  the  legislative  oversight  committee                                                              
should be  to assure  that the regulatory  policy is  aligned with                                                              
the  long term  public  interest,  that regulatory  processes  are                                                              
completed in  a timely  fashion, that due  process is  afforded to                                                              
all and that  substantive law is being applied  appropriately. Two                                                              
is  to use  the findings  and recommendations  of the  legislative                                                              
oversight committee,  along with  testimony provided in  these and                                                              
related  legislative   committee  hearings   to  guide   the  2003                                                              
legislature's  deliberations on  the  proposed reauthorization  of                                                              
the  RCA.   The  legislature   should  also   utilize  the   state                                                              
telecommunication   study   as  it   considers   the   appropriate                                                              
statutory,  regulatory and  policy directions  necessary to  guide                                                              
the regulators and telecommunications  matters. We offer again the                                                              
issues that are  attached to our testimony as a  further guide for                                                              
matters  that might  be considered.  And then  three is, we  would                                                              
request that the  Chair of the RCA be rotated so  as to spread the                                                              
responsibilities   and   prevent   a  single   commissioner   from                                                              
exercising undue influence.                                                                                                     
                                                                                                                                
As  pertaining to  ACS specifically,  we are  concerned about  the                                                              
appearance  of   impropriety  with  regard  to   Chair  Thompson's                                                              
interactions with GCI,  what we perceive to be a  bias against ACS                                                              
in the regulatory processes and decisions,  and the possibility of                                                              
retribution  against  ACS  by  the   RCA  in  current  and  future                                                              
regulatory  orders as a  result of  our testifying. Mr.  Chairman,                                                              
that does conclude our testimony.                                                                                               
                                                                                                                                
SENATOR COWDERY: What is your - I  think we asked this earlier and                                                              
you wasn't  here, I think  you was in  San Francisco but,  what is                                                              
the age of the rate cases and the  approximate ages and the tariff                                                              
cases with ACS?                                                                                                                 
                                                                                                                                
MR. CARSON:  The current rate case  that we have that  affects all                                                              
four of  our telephone  companies commenced on  July 1,  2000. The                                                              
existing rates in  all four of those companies range  from about 8                                                              
to 11  years, so  it's been that  long since  there's been  a rate                                                              
case  in  those  properties.  The  UNE  matter  specifically,  our                                                              
initial request  was in  early 2000.  There was  a hearing  in the                                                              
latter part of 2001 in which we got  another temporary rate and so                                                              
we're still waiting on a schedule on that issue.                                                                                
                                                                                                                                
SENATOR  COWDERY:   And  I  think  we  asked,   Mr.  Chairman,  of                                                              
documentation regarding the Aurora Subdivision, any...                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: They wouldn't have it [indisc.].                                                                               
                                                                                                                                
SENATOR COWDERY: Oh they didn't.                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR:  That was  the only copper  that GCI owns  in the                                                              
whole state.                                                                                                                    
                                                                                                                                
MR. CARSON:  Our understanding  is  that GCI did  lay copper  wire                                                              
into the Aurora  Subdivision. We have sought a  wholesale rate and                                                              
not been able to get one.                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: I think the question  you may be asking is one we                                                              
asked, how come  - would ACS be allowed a similar  rate to go into                                                              
the Aurora Subdivision and compete against GCI?                                                                                 
                                                                                                                                
SENATOR  COWDERY:  I think  that  may be  -  this was  typed  out.                                                              
They're  written out  by my staff  in Anchorage  as the  questions                                                              
were asked so maybe that's...                                                                                                   
                                                                                                                                
MR.   CARSON:   I  could   certainly   this  afternoon   get   you                                                              
communications,  correspondence, between  us and  GCI relative  to                                                              
our desire to lease those lines as they lease ours.                                                                             
                                                                                                                                
SENATOR COWDERY: I'd appreciate that.                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: And you'd been turned  down on that, haven't you?                                                              
                                                                                                                                
MR. CARSON:  We've been offered the  opportunity, as I  recall, to                                                              
lease them at the retail rate.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Oh.  You can lease at their retail  rate whatever                                                              
their embedded costs  are but they get a 50  percent basic bargain                                                              
on your rights  - on your end,  on your costs. That's  fair - what                                                              
the heck. Senator Therriault.                                                                                                   
                                                                                                                                
SENATOR THERRIAULT:  Could you make some comments  on the proposed                                                              
House  language  dealing  with the  oversight  mechanism  and  the                                                              
report back to  the legislature? Does it mesh up  with what you're                                                              
desirous of seeing on that point?                                                                                               
                                                                                                                                
MR. CARSON: Senator,  I believe the last version I  saw may not be                                                              
the  most  current one.  At  that  point  in  time, it  had  Chair                                                              
Thompson appointing  the members  of that oversight  committee and                                                              
it was suggested to me this morning  as earlier that perhaps there                                                              
was a change in that.                                                                                                           
                                                                                                                                
SENATOR  THERRIAULT: It  was. I  think  it's the  Speaker and  the                                                              
President  and  the  Governor  somehow  in  combination  make  the                                                              
appointments.                                                                                                                   
                                                                                                                                
MR.  CARSON: I  haven't seen  the actual  language but  if it  was                                                              
truly a legislative oversight committee,  that would be consistent                                                              
with what we think would be appropriate.                                                                                        
                                                                                                                                
SENATOR THERRIAULT:  And so  the membership  that was written  out                                                              
you're supportive  of? It's  just who  made the appointments  that                                                              
you had a problem with?                                                                                                         
                                                                                                                                
MR. CARSON:  Again, I think  there were  some changes also  in the                                                              
membership, perhaps,  last night. Our perspective would  be not an                                                              
advisory committee  of industry members that are  regulated by the                                                              
Commission  but rather  a  group that  was  truly independent  and                                                              
associated  with  the legislature  that  could  view this  from  a                                                              
broader  perspective and  without  the concerns  of  having to  go                                                              
before  the  Regulatory  Commission on  decisions.  Actually,  the                                                              
notion of an  advisory commission or committee like  that might be                                                              
quite  useful but  I  don't believe  it's  a substitute  for  true                                                              
legislative oversight.                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: Go ahead Senator Donley.                                                                                       
                                                                                                                                
SENATOR DONLEY: Well, Mr. Carson,  when you were talking about the                                                              
rate that GCI  has offered to lease that one  subdivision you said                                                              
you believed it was the retail rate  but you're not positive about                                                              
that because I  have read information from the  hearings last week                                                              
from GCI  that claim  they offered  to lease it  at the  same rate                                                              
that ACS  could lease  from them.  Is there -  I'm just  trying to                                                              
understand - I'm  hearing - I don't - maybe  there's a disconnect,                                                              
we're talking apples - I don't know.                                                                                            
                                                                                                                                
MR. CARSON: That doesn't comport  with my recollection but I will,                                                              
as I leave  this hearing, call and  have it facsimiled  to me with                                                              
the latest  correspondences so  I don't claim  to have all  of the                                                              
information on that.                                                                                                            
                                                                                                                                
SENATOR  DONLEY:  Okay,  so  it's   qualified.  Your  response  is                                                              
qualified? Okay. I  did have - well I guess that's  it. Thanks Mr.                                                              
Chairman.                                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: Senator Cowdery.                                                                                               
                                                                                                                                
SENATOR  COWDERY: What  is your recommendation  on timelines.  Now                                                              
we've heard  from the  Commission that  said that they've  delayed                                                              
near 60 -  58 - times or something  for cause. Is that  - extended                                                              
rather - is that  an abuse, do you think, of a  situation, for not                                                              
making decisions  and what kind of  timelines do you  think should                                                              
be -  that we should  work on  to try to  be, you know,  something                                                              
that's realistic.                                                                                                               
                                                                                                                                
MR. CARSON: Senator, I would say  first that I am sympathetic with                                                              
the level  of workload  that they  have but we  need to  have some                                                              
certainty and I thought the House  bill made a good initial thrust                                                              
at  setting forth  some  timelines that  would  be meaningful  so,                                                              
subject to some  further review here, I think  there's much that's                                                              
commendable in setting forth some statutory timelines.                                                                          
                                                                                                                                
SENATOR COWDERY:  And what  about the cause?  Do you  believe when                                                              
they - the  60 cases or thereabouts,  do you think that's  true or                                                              
do you think  that's maybe an easy  way out? I mean just  up frank                                                              
about what you think of that.                                                                                                   
                                                                                                                                
MR.  CARSON: It  seems to  be a  mechanism  to buy  more time  and                                                              
establishing  some firm  timelines and  some criteria  I think  is                                                              
what we need to do.                                                                                                             
                                                                                                                                
SENATOR COWDERY:  If we did firm  timelines, what would  happen, I                                                              
guess, if they didn't  meet them? I mean how could  we assure that                                                              
what we  did is going  to have the impact  and the effect  that we                                                              
want, we hope to have?                                                                                                          
                                                                                                                                
MR. CARSON: Well I suppose one answer  would be, for example, in a                                                              
tariff  if they  don't meet  the  timeline, the  tariff goes  into                                                              
effect.                                                                                                                         
                                                                                                                                
SENATOR COWDERY:  And one  last area -  on the telephone,  the RCA                                                              
members. Who  serves on the case  - are the members that  serve on                                                              
the GCI and ACS cases?                                                                                                          
                                                                                                                                
MR. CARSON:  We  have had -  in most  instances that  I have  been                                                              
involved  in, the  panel  has  been Chair  Thompson,  Commissioner                                                              
Abbott and  Commissioner Smith. There  were a couple  of occasions                                                              
when we had  Commissioner Strandberg. I can't  recall Commissioner                                                              
Demarco being on one of our telecom panels.                                                                                     
                                                                                                                                
SENATOR  COWDERY:   So  the   primary  is   Mr.  Abbott   and  the                                                              
Commissioner and Mr. Smith?                                                                                                     
                                                                                                                                
MR. CARSON: That has been my experience [indisc.].                                                                              
                                                                                                                                
CHAIRMAN TAYLOR:  Would it  be fair to  say that the  Chairman has                                                              
either  assigned herself  and that  she assigns  the members,  but                                                              
that she has assigned herself on every single GCI case?                                                                         
                                                                                                                                
MR. CARSON: It is my understanding  that it is within her power to                                                              
make those assignments.                                                                                                         
                                                                                                                                
CHAIRMAN  TAYLOR:  My  question   is  whether  it  is  within  her                                                              
discretionary  power or  not, I'm  just asking  whether or  not it                                                              
just  happens to  be a fact  that she  has [indisc.]  she sits  on                                                              
every single GCI case.                                                                                                          
                                                                                                                                
MR. CARSON:  She has sat  on every one  that I have  been involved                                                              
in.                                                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR: Senator Therriault?                                                                                            
                                                                                                                                
SENATOR  THERRIAULT:  Your attachment  here  talks  about the  due                                                              
process  in  evidentiary hearings  and  I  did  have a  couple  of                                                              
questions the day  that you were not able to be  present. It seems                                                              
like  in  your  literature  here  it  talks  about  the  diversion                                                              
procedure, appearing  like it was implemented to  speed things up.                                                              
I've heard  from a number  of utilities  that they are  frustrated                                                              
that some  things that they  believe could  just be dealt  with by                                                              
offering additional information so  that the Commission could make                                                              
a  decision get  kicked  into this  quasi-judicial  status and  so                                                              
you've  got to  have  a hearing  or attorneys  on  both sides  and                                                              
there's discovery  and, you  know, it  just jacks  up the  cost so                                                              
they were  very desirous of a  more simple process  that hopefully                                                              
would  hold  down  costs  and it  appears  that  that's  what  the                                                              
Commission was going  to when they created this  diversion process                                                              
and I'm  just wondering here  you say that  - well, let's  see, it                                                              
should   be  suspended,   number   one,  until   regulations   are                                                              
promulgated - let's see, that would  basically allow for discovery                                                              
and it  seems like,  again, really,  there would  be no  diversion                                                              
process.  It would  just  kick everything  up  into this  judicial                                                              
status  again  and   so  the  desire  of  something   that's  more                                                              
streamlined and less  costly would be lost. I'm  just wondering if                                                              
you don't see a legitimate need for  that and then, with regard to                                                              
the one case where the diversion  process was implemented and that                                                              
the courts sent  it back down, and there was  some discussion last                                                              
week that  the courts found that  there really were some  facts in                                                              
dispute and  so it  needed to go  up to  that judicial  level, not                                                              
that necessarily  that the process  should be done away  with. So,                                                              
anyway, I'm  just wondering  if you  had some additional  comments                                                              
because there are some utilities  out there that want something of                                                              
this nature.                                                                                                                    
                                                                                                                                
MR. CARSON: Those  are the issues that Ted Mininski,  our director                                                              
of... [END OF TAPE]                                                                                                             
                                                                                                                                
TAPE 02-46, SIDE A                                                                                                            
                                                                                                                                
SENATOR DONLEY: Last  week when we were having  our hearings there                                                              
was discussion of one arbitration  that took place. They called it                                                              
baseball  arbitration and  I think in  our -  I've never  heard it                                                              
referred to  as that. My  experience is  kind of last  best offer.                                                              
Both  sides come  up  with something  and  the arbitrator  chooses                                                              
between the two.  And there was this huge gap between  the ACS and                                                              
the GCI proposal  and I was perplexed, you know,  by the gap being                                                              
so  huge and  even agreeing  to that  kind of  arbitration if  the                                                              
gap's  going  to  be that  big  but  -  and  so I  was  trying  to                                                              
understand the whole  process more and the explanation  to me from                                                              
one  point  of  view was  that  there  were  different  litigation                                                              
strategies involved  and ACS tended  to go with the  baseball, the                                                              
homerun, and I was wondering that  kind of explanation makes sense                                                              
to me if all the cases are under  that last best offer scenario. I                                                              
doesn't seem  like the majority  of these  issues are that  way. I                                                              
mean, other  than that  arbitration are there  any other  of these                                                              
rate setting  issues  that are that  last best  offer or  baseball                                                              
arbitration scenario?                                                                                                           
                                                                                                                                
MR.  CARSON:  That's really  to  my  knowledge reserved  for  this                                                              
interconnection agreement type of  arbitration. We are in the hope                                                              
of  getting both  parties putting  forward a  reasonable offer  so                                                              
that they would be relatively close  to each other. You would pick                                                              
one or the other and there's no compromise  or splitting the baby.                                                              
If there's a  perception on anyone's part that our  pitches, so to                                                              
speak,  were  extreme,  I  would  suggest that  you  look  at  the                                                              
difference  between  our embedded  rate,  $33.50,  as a  reference                                                              
point, the  $27.30 - I'm talking  about Fairbanks now,  the $27.30                                                              
that  we put  forward  as a  hypothetical  rate for  demonstrating                                                              
economic harm, and  the ultimate rate of $19.19.  We were pitching                                                              
things that  were related  to what it  really would cost  us going                                                              
forward to  build a  plant, construct  these loops, etc.,  whereas                                                              
the pitches coming  from the other side tended to  be based on the                                                              
Lower 48. Now, in many cases admittedly,  there was some kind of a                                                              
cost of  living or Alaska  differential thrown  in, but it  is the                                                              
difference  between a  hypothetical  input and  a  real input  and                                                              
that's why  we continued,  apparently, to lose,  and why we  got a                                                              
rate that doesn't  bear any relationship to what  our actual costs                                                              
to  build  are.   So  the  strength  of  that   kind  of  baseball                                                              
arbitration  is hopefully  it drives  people  towards some  middle                                                              
ground  that's reasonable.  It's  weakness is  if you  have -  I'm                                                              
sorry to  use the  word bias,  but if  you have  a bias towards  a                                                              
certain approach, it's  going to result in lots  of decisions that                                                              
are adverse to you.                                                                                                             
                                                                                                                                
SENATOR DONLEY:  But how much of  all of these decisions  that are                                                              
going on  utilize that form?  I mean it  seems there was  that one                                                              
case, one  issue, but most of  these others are things  where they                                                              
can - where the Commission can go wherever they want in between.                                                                
                                                                                                                                
MR.  CARSON:  Yes.  Things  like  depreciation  rates,  those  are                                                              
evidentiary hearings  where we put in  our case and, in  this case                                                              
it  was  GCI basically  put  in  their  case  against us  and  the                                                              
Commission makes a determination  not based on pitches, taking one                                                              
position  or the  other, but  based on  what they  feel the  final                                                              
answer should  be based  on the  evidence in  the record.  That is                                                              
very different from the interconnection type of arbitration.                                                                    
                                                                                                                                
SENATOR DONLEY: So  there was only interconnection  - okay. Thanks                                                              
Mr. Chairman.                                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Senator Cowdery, I think you had a question.                                                                   
                                                                                                                                
SENATOR COWDERY: Yea. You know it  was talked about the last week,                                                              
some of the hearings, about the hearing  officers and the fairness                                                              
of that -  of the hearing officers  since they worked for  RCA and                                                              
are paid out of  the RCA budget. Do you think  that's an area that                                                              
should be changed or what's your opinion on that?                                                                               
                                                                                                                                
MR. CARSON: I know that in certain  jurisdictions there is a model                                                              
that  uses  an  administrative  law  judge,  for  example,  that's                                                              
independent from  the Commission  in a sense.  Or, if you  look at                                                              
the National Labor Relations Board,  you have a decision before an                                                              
administrative  law   judge  and  then  your  appeal   is  to  the                                                              
Commission if  there is  a dispute over  that decision.  There are                                                              
certainly other  models that  could be used  in connection  with a                                                              
more  full  investigation  of the  appropriate  statutory  changes                                                              
required to  reauthorize this  Commission. I  think that  might be                                                              
one we  would encourage  you to look  at, as  also with  the staff                                                              
reports.                                                                                                                        
                                                                                                                                
SENATOR COWDERY:  The reason I  got into that,  I know when  I was                                                              
with the Municipality, we had hearing  officers that were hired to                                                              
settle  issues  between  contractors  and  the  first  -  the  big                                                              
complaint that the  administration always got was  that these guys                                                              
know where  their paycheck's  coming from.  They're looking  for -                                                              
you know. So they didn't think it  was actually a fair decision in                                                              
their  perspective, whether  they won  or lost  they didn't  think                                                              
that system - that's why I was asking  if you think this is a fair                                                              
or could there be improvements in that?                                                                                         
                                                                                                                                
MR. CARSON: I think there could be  improvements. I think it's one                                                              
of the issues that should be looked at by the Legislature.                                                                      
                                                                                                                                
CHAIRMAN TAYLOR: Did you testify on the House side?                                                                             
                                                                                                                                
MR. CARSON: Yes I did sir, last night.                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR:  Last night  - and  that was on  the bill  that -                                                              
what bill  were you testifying on,  the Governor's bill  or the CS                                                              
invented by Mr. Mulder?                                                                                                         
                                                                                                                                
MR. CARSON: Mr.  Chairman, it was the CS that was  handed to me as                                                              
I came in.                                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR: That's the one where  the Chairman would pick her                                                              
own advisory  group  to review the  activities  of her agency  and                                                              
they would  start in October next year  - or this year  - and they                                                              
wouldn't report for one full year  until October of the next year?                                                              
                                                                                                                                
MR. CARSON:  That's correct. I had  not seen this  before entering                                                              
the hearing room.                                                                                                               
                                                                                                                                
SENATOR THERRIAULT: Have you seen  any proposed language for us to                                                              
consider here today? Any drafts, anything?                                                                                      
                                                                                                                                
MR. CARSON: I have not.                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR:  Good 'cause I haven't  seen that yet  either and                                                              
the lady's still working on it across  the street and she's hoping                                                              
to come  back across from  it but there's  a little  difference in                                                              
this room. I don't  have a CS prepared by somebody  else out there                                                              
that I'm going to dump on this place  and claim it's mine. This CS                                                              
is  going  to  come  out of  the  drafter  based  on  what's  been                                                              
testified  to in  front of  this  committee. By  now, the  largest                                                              
single telephone utility in the state  and the largest supplier of                                                              
electrical energy in this state and  I want to thank you very much                                                              
for coming in.                                                                                                                  
                                                                                                                                
SENATOR COWDERY: 24 hours of testimony  that put this committee...                                                              
                                                                                                                                
CHAIRMAN TAYLOR: Yes, at least so  far.  And we're going to take a                                                              
break, get a bite  to eat here in the lounge probably  and try and                                                              
come  back in  at, hopefully,  about  45 minutes  from  now and  -                                                              
because  I  know  you have  commitments  too,  don't  you  Senator                                                              
Therriault?                                                                                                                     
                                                                                                                                
SENATOR  THERRIAULT: Mr.  Chairman,  the LB&A  meeting will  start                                                              
shortly.                                                                                                                        
                                                                                                                                
SENATOR DONLEY: Mr.  Chairman? By the way, for the  record, when I                                                              
was  talking   about  LB&A,   I  wasn't   talking  about   Senator                                                              
Therriault's  LB&A, I  was  talking about  LB&A  about eight,  ten                                                              
years ago.                                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR: Yea,  I remember that one. You're  right, Senator                                                              
Therriault was certainly  not a part of that. Okay,  we will stand                                                              
in  recess for  about 45  minutes  and I  will bring  up GCI  next                                                              
because I  want them  to have  an opportunity  to respond  to ACS,                                                              
just as ACS had an opportunity to respond to them in Anchorage.                                                                 
                                                                                                                                
[THE COMMITTEE RECESSED FOR APPROXIMATELY  ONE HOUR AND RECONVENED                                                              
AT 1:07 P.M.]                                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: ... a quorum present,  that being Senators Ellis,                                                              
Cowdery and Taylor. We're under the  same subject and Ms. Tindall,                                                              
I wanted  to give  GCI an opportunity  to respond  or to  give any                                                              
further comment that  you had after ACS had just  done the same so                                                              
- if you want  a few moments to catch your breath  and do whatever                                                              
you need to do that's...                                                                                                        
                                                                                                                                
MS. DANA  TINDALL, GCI:  If I could  just take  a minute  to write                                                              
down my list I had from last time?                                                                                              
                                                                                                                                
CHAIRMAN TAYLOR: We'll just stand at-ease for a minute.                                                                         
                                                                                                                                
[THE COMMITTEE TOOK AN AT-EASE FROM 1:08 to 1:09 p.m.]                                                                          
                                                                                                                                
CHAIRMAN TAYLOR:  ... both  of you -  you're still under  oath and                                                              
I'll ask if you have any comments you want to make.                                                                             
                                                                                                                                
MS. TINDALL: Sure. Mr. Carson has  said much that we disagree with                                                              
and I'll just touch on a few of the  things. Mr. Carson has talked                                                              
at  length  about  temporary  rates in  Anchorage.  I  think  it's                                                              
important for  the committee to understand  that at the  time that                                                              
those  rates  were set  by  the prior  commission,  Alaska  Public                                                              
Utilities Commission,  that there were  not rules in place  by the                                                              
FCC. The FCC had promulgated rules.  There had been a lawsuit. The                                                              
 th                                                                                                                             
8  Circuit  had vacated those  rules and it  was on appeal  to the                                                              
Supreme Court  and that  was the first  time around. And  so, what                                                              
the former APUC did was baseball  arbitration and when they termed                                                              
these rates temporary, it was not  temporary as I understand it in                                                              
the legal sense.  They were just - we will redo  these in the next                                                              
few years - they  were going to be redone in three  years anyway -                                                              
when there  are rules.  There is  a very  definite term  for legal                                                              
temporary   rates  in   the  utility   industry.  Usually   that's                                                              
considered interim  and refundable. These  rates were not  in that                                                              
category of temporary  and they were not refundable  and they were                                                              
declared lawful by both the Alaska  Public Utilities Commission, I                                                              
believe, and  the RCA. And  so, any testimony  that these  rates -                                                              
that somehow  these rates  were not  lawful or  are not  lawful or                                                              
that  they   were  temporary,  the   temporary  was   actually  an                                                              
unfortunate wording  just based on  the notion that  there weren't                                                              
regs in place  at the time. They  did those rates and  those rates                                                              
were done pursuant to baseball arbitration.                                                                                     
                                                                                                                                
And, to  further finish the history  of the Anchorage  loop rates,                                                              
there did come a time when ACS came  forward and asked for interim                                                              
rates to be set.  GCI testified at that time that  were you to use                                                              
the  model  that the  Commission  had  ordered for  Fairbanks  and                                                              
Juneau rates  and had also said at  that time was going  to be the                                                              
model used  for Anchorage rates  and if you  use the same  type of                                                              
inputs  that the  highest  rate that  could  be substantiated  was                                                              
$14.92 - at  that time, and at  any time, ACS had not  put forward                                                              
much in the way on the record to  substantiate higher rates and so                                                              
I think,  it's my belief and  I've never talked to  any Commission                                                              
members about  this but  simply from observation  it is  my belief                                                              
the Commission did what they could to give them an interim rate.                                                                
                                                                                                                                
Now that rate  - the rate that  is present today, is  temporary in                                                              
the sense  that it  is interim  and refundable  at the request  of                                                              
ACS. As far as  the rate case goes, when ACS  purchased the Alaska                                                              
Telephone Utility  and the Fairbanks Municipal Utility  System and                                                              
the other utility  system that make up ACS as they  know it today,                                                              
they argued that  there would be a lot of efficiencies.  There was                                                              
a settlement,  I believe.   In that case GCI  was a party  to that                                                              
case and, as part of the settlement,  ACS agreed to undergo a rate                                                              
case for all of  these properties. So the rate case  that is going                                                              
on today is simply fulfilling what  ACS agreed to when they bought                                                              
these properties.  At the time ACS bought these  properties, there                                                              
was competition  in Anchorage and,  I believe, GCI  had petitioned                                                              
to open the Fairbanks and Juneau markets to competition.                                                                        
                                                                                                                                
SENATOR  COWDERY: How  old  was these  rates  that you're  talking                                                              
about?  What's the date  of them  that was  established? You  said                                                              
when they bought...                                                                                                             
                                                                                                                                
MS. TINDALL: The $14.92 rate?                                                                                                   
                                                                                                                                
SENATOR COWDERY: You said when they bought ATU. When was that?                                                                  
                                                                                                                                
MS. TINDALL: They bought ATU in 1999?                                                                                           
                                                                                                                                
MR. JIMMY JACKSON, GCI: The '99 timeframe  or the '98 timeframe. I                                                              
could not be absolutely certain.                                                                                                
                                                                                                                                
MS. TINDALL: Something like that.                                                                                               
                                                                                                                                
SENATOR COWDERY: So we're using the same rates as then?                                                                         
                                                                                                                                
MS. TINDALL: No. I'm glad you corrected me Senator.                                                                             
                                                                                                                                
MR. JACKSON: He's talking about retail rates, I think.                                                                          
                                                                                                                                
MS. TINDALL:  I know.  They asked  for an  interim and  refundable                                                              
increase for  retail local rates  in Anchorage and  the Commission                                                              
granted them  one of 24  percent increase  so those are  the rates                                                              
that are in  effect today. I don't  know the exact time  that that                                                              
was granted  but I think it was  within the last year  to the best                                                              
of my recollection.                                                                                                             
                                                                                                                                
As far  as the  burden of  proof goes,  you know,  things are  not                                                              
always as simple  as presented. When GCI first  petitioned to have                                                              
the rural exemption lifted for Fairbanks  and Juneau to the Alaska                                                              
Public   Utilities  Commission,   the   Alaska  Public   Utilities                                                              
Commission  placed  the  burden  of  proof on  GCI  to  show  that                                                              
competition  would  not economically  harm  ACS.  They placed  the                                                              
burden of coming  forward with the  data on ACS. ACS did  not come                                                              
forward with  any data in that  proceeding and the  Commission, at                                                              
the  end  of   that  proceeding,  said  they  could   not  make  a                                                              
determination for  that reason and  because the Commission  itself                                                              
had not done the work it was supposed  to do. It had not conducted                                                              
- set up a  universal service system within the state.  It had not                                                              
gotten rid  of any implicit  subsidies to  make them  explicit and                                                              
certain,   which   they   were    required   to   do   under   the                                                              
Telecommunications  Act. And so,  at the  end of that  proceeding,                                                              
they said  they were not able  to make a determination  on whether                                                              
or  not  competition  would  economically  harm ACS  and  so  they                                                              
declined to remove the rural exemption.  GCI appealed that case in                                                              
state superior court  and, as a matter of state law,  I believe at                                                              
that time as well there were no regulations  for the court to look                                                              
                 th                                                                                                             
at because  the 8  Circuit had  vacated those regulations  at that                                                              
time as  well. GCI  appealed that  case and as  a matter  of state                                                              
law, the courts found that the burden  of proof was required to be                                                              
put on  ACS. They  remanded that  case back to  the APUC  and told                                                              
them to  do it again and  also interpreted the  Telecommunications                                                              
Act for the Commission and said that  the Commission must make all                                                              
the decisions  under the Telecommunications  Act in the  most pro-                                                              
competitive manner  possible. They must  - when in doubt,  you got                                                              
to assume  competition is the right  answer basically is  what the                                                              
court said.  The Alaska Public  Utilities Commission in  it's very                                                              
last days - it again - reheld the  hearings, all the same hearings                                                              
again, weeks and weeks of hearings  and in its last days it lifted                                                              
the  rural  exemption  from  full  competition  in  Fairbanks  and                                                              
Juneau. When the  - and literally I think that was  the day before                                                              
it's last day.                                                                                                                  
                                                                                                                                
When the new RCA began two days later,  ACS immediately petitioned                                                              
the  RCA  for  reconsideration.  I  think  they  might  have  also                                                              
petitioned  the   court  for  stays,   which  were   declined.  My                                                              
understanding  is that in  order for  the RCA  - the RCA  accepted                                                              
that  petition and  said they  would rule  on reconsideration  and                                                              
then, my  understanding in  order to  rule on reconsideration,  is                                                              
each Commissioner had  to read the entire record  and in the order                                                              
they put out, they  swore in that order that they  indeed had read                                                              
the  entire record,  all  of  the weeks  and  weeks  and weeks  of                                                              
hearings.  So I think it is a misimpression  to think that ACS was                                                              
somehow  simply dismissed  out  of  hand and  the  RCA upheld  the                                                              
ruling.                                                                                                                         
                                                                                                                                
ACS did, of course, appeal to the  state superior court and one of                                                              
the issues that they appealed on  was burden of proof and this was                                                              
to a different  state superior court  judge. The first one  was to                                                              
Judge Sigmund  Murphy. This one was  to Judge John Reese  and John                                                              
Reese as well found that, as a matter  of state law, the burden of                                                              
proof belonged  on the  incumbent.  At the time  the judge  remade                                                              
                    th                                                                                                          
this finding, the  8  Circuit - the FCC had gone  back - you know,                                                              
you gotta  understand years  tick away in  the appeals  process so                                                              
meanwhile,  back in Washington,  the United  States Supreme  Court                                                              
                                          th                                                                                    
had  ruled on  the first  ruling by  the 8   Circuit vacating  the                                                              
FCC's rules  and the issue in that  ruling was whether  or not the                                                              
FCC  was  permitted  to  promulgate rules  for  the  entire  state                                                              
instead of the  state commissions. The FCC ruled  that indeed they                                                              
were allowed to  and so the FCC - or I'm sorry  - the U.S. Supreme                                                              
Court ruled  that indeed  the FCC  was allowed to  and so  the FCC                                                              
                                             th                                                                                 
reinstated their previous regulations.  The 8  Circuit once again,                                                              
that was of course  appealed by the Bell Operating  Companies, the                                                              
 th                                                                                                                             
8  Circuit  ruled then  that they  could not  place the  burden of                                                              
proof on the  incumbent. The case was immediately  appealed to the                                                              
                                       th                                                                                       
United States  Supreme Court and  the 8  Circuit stayed  their own                                                              
order.                                                                                                                          
                                                                                                                                
                 th                                                                                                             
Now  when  the  8   Circuit  makes   a  ruling  vacating  the  FCC                                                              
regulations,  it is our  argument and the  argument that  has been                                                              
accepted by  the courts, that  all it does  as a matter of  law is                                                              
vacate the  FCC's regulations.  It is not  setting policy  for the                                                              
entire country so  then states such as Alaska are  in the position                                                              
of having no rules to follow. Well,  that was almost the situation                                                              
                   th                                                                                                           
except  that the  8  Circuit  stayed their  own order  so, on  the                                                              
                      th                                                                                                        
second  appeal, the  8  Circuit  vacated the  FCC regulations  and                                                              
then  stayed  their  order  so,  as  a  matter  of  law,  the  FCC                                                              
regulations were  in place at the  time that state  superior court                                                              
Judge Reese  ruled but he did  not rule under FCC  regulations. He                                                              
again ruled  as a  matter of state  law that  the burden  of proof                                                              
belonged on the incumbent local exchange carrier ACS.                                                                           
                                                                                                                                
At  this time,  when the  state supreme  - when  the U.S.  Supreme                                                              
Court - we've  got a graph of  all of these appeals,  there's been                                                              
hundreds of them, when the U.S. Supreme  Court took up this issue,                                                              
they did  decline - they  denied cert on  taking up the  burden of                                                              
proof issue  but they did take up  the pricing issues so,  at this                                                              
point,  the situation  we  were under  legally  is  when the  U.S.                                                              
Supreme  Court denied  cert on  the  burden of  proof issue,  they                                                              
vacated  the FCC's  rules and  there are  not rules  right now  on                                                              
where the burden  of proof should be placed. The  only guidance we                                                              
have  is from  the state  superior  court, which  directed RCA  to                                                              
place  the  burden  of  proof  on  the  incumbent  local  exchange                                                              
carrier. So,  I hope  that clears up  any misimpressions  that may                                                              
have come about on burden of proof.                                                                                             
                                                                                                                                
Another misimpression I think that's  come about is whether or not                                                              
anybody has ever put copper wires  in the ground and I think Jimmy                                                              
Jackson would like to speak to that.                                                                                            
                                                                                                                                
MR. JACKSON: Well,  thank you. I'd like to speak  to that and also                                                              
the allegation that's been made,  both last week and this morning,                                                              
regarding the  fact that  GCI has refused  to allow ACS  access to                                                              
its facilities  at the Aurora  Subdivision on Elmendorf  Air Force                                                              
Base.  I assume  Mr.  Carson just  doesn't  know  the facts  there                                                              
because -  as his explanation is  very contrary to what  the facts                                                              
actually are.  First [indisc.], this  is a situation  on Elmendorf                                                              
Air Force Base and the rules that  apply on the base are different                                                              
than the rules -  not the rules, the application  of things on the                                                              
base are  different than they are  in civilian areas  just because                                                              
of security reasons and other things.  GCI does not actually serve                                                              
any customers  on the  base with  ACS's copper  loops. We  are not                                                              
able to do that  on the base for various reasons.  The reasons may                                                              
not  even have  to do  with ACS  - they  may have  to do with  the                                                              
military  but it's not  something we're  able to  do on  the base.                                                              
Nonetheless,  after the  Aurora Subdivision  was  built, when  ACS                                                              
asked us for  the ability to provide service to  those residential                                                              
customers on  the base, we told  them that yes, they  could indeed                                                              
access our  loops on  the base in  the exact  same manner  that we                                                              
access their loops  when there's a comparable  technology used and                                                              
at the exact same price that they  charge us. If I could read from                                                              
                                                st                                                                              
the letter which was sent to ACS  on February 21,  2002, it says -                                                              
we, first  of all,  offered them  another type  of service  and it                                                              
says - alternatively, ACS - I'm sorry,  that's the wrong paragraph                                                              
                                        th                                                                                      
- to  begin with, both  your October  26  letter and  your January                                                              
  th                                                                                                                            
28  letter  acknowledge that we  are offering you  interconnection                                                              
at GCI's GR 303  - that's a technical term which  I can explain if                                                              
you want me  to - at GCI's GR  303 port at the SADC  wire center -                                                              
that's South Anchorage Dispatch Center  wire center - This type of                                                              
interconnection  is what  we have  requested from  ACS to  provide                                                              
access to loops  to serve customers within carrier  serving areas.                                                              
This interconnection  would provide you with the  ability to lease                                                              
loop from us  to serve customers at the Aurora  Subdivision, which                                                              
is  also a  carrier serving  area. With  respect to  the rate  for                                                              
leasing a  loop, we would charge  you the same Anchorage  UNE rate                                                              
that we pay you.  Currently, the Anchorage UNE rate,  as you know,                                                              
is $14.92.                                                                                                                      
                                                                                                                                
We offered  them the same  thing that we  get from them  for areas                                                              
which are  these so-called carrier  serving areas  and furthermore                                                              
we offered  them something that, as  I said, we don't even  get at                                                              
all  on   Elmendorf  Air  Force   Base  because  of   the  special                                                              
                                         st                                                                                     
considerations. That was the February  21  letter. We also offered                                                              
them to  resell GCI service  at the same  discount that  they give                                                              
us. That's  a different  method of providing  service when  you do                                                              
what's called wholesale resale and  we offered them the exact same                                                              
discount  that  they  give  us  for  that  service  and  that  was                                                              
                                     th                                                                                         
subsequent to a letter of October  16.  Now, if you get from ACS a                                                              
                      th                                                                                                        
letter  of October 16,   it mentions  the retail  rates and  says,                                                              
we'll expedite that  and we will to go ahead and  talk about these                                                              
other ways of doing. So our first  offer to them in October was to                                                              
immediately do  it at retail  rates and  to also talk  about these                                                              
other mechanisms. Only  a few months later, we had  talked to them                                                              
and we  offered  to them the  exact same  thing that  we got  from                                                              
them.                                                                                                                           
                                                                                                                                
CHAIRMAN  TAYLOR: How  did  that compare  with  your [indisc.]  in                                                              
ground costs of installation?                                                                                                   
                                                                                                                                
MR. JACKSON: I do not know, sir.                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: Above it? Below it?                                                                                            
                                                                                                                                
MR.  JACKSON:  I have  no  idea. I  have  absolutely  no idea.  We                                                              
determined that - I think the word  hypocrites has been used here.                                                              
We  decided that  the non-hypocritical  thing  to do  would be  to                                                              
offer them exactly what they offered us.                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: Okay. Go ahead, Dana.                                                                                          
                                                                                                                                
MS. TINDALL: The  last thing, and I'm sure there's  more, I'm just                                                              
didn't  had   -  hadn't  prepared   a  complete  list  -   is  the                                                              
depreciation case. GCI  was an intervener in that  case. That case                                                              
had a  significant impact  not only on  the loop rates  that would                                                              
later be set but  on the access charges that we pay  so we were an                                                              
intervener  as ACS's  biggest customer.  And GCI,  and I'm  sorry,                                                              
Jimmy  can again  explain  why we  were  arguing the  depreciation                                                              
rates that we did.                                                                                                              
                                                                                                                                
MR. JACKSON: Well it's - depreciation  is, if you want to get into                                                              
technical  subjects,  is  actually more  technical  than  anything                                                              
that's yet been discussed. The issue  - there were two issues that                                                              
GCI had, which  is, as Dana said, they directly  affect the access                                                              
charges  that we  pay to  ACS. If  I remember  correctly from  the                                                              
proceeding, the  total amount that  AT&T and GCI together  pay ACS                                                              
was either  $24 or $28 million  per year -  I think it was  28, of                                                              
which approximately half of that  would be paid by GCI so we had a                                                              
$14 million  annual stake in the  proceeding, which is  the reason                                                              
we  were participating  in that  proceeding  and the  depreciation                                                              
rates  have  a  substantial  impact  on  those  rates.  The  other                                                              
possibility   which  was   indefinite,  but   there  was   also  a                                                              
possibility that  the depreciation rates from that  proceeding may                                                              
affect the UNE arbitration case so  we were in that proceeding for                                                              
that reason. We  presented the expert testimony of  a witness from                                                              
Washington,  D.C. ACS presented  their expert  witnesses  who were                                                              
also from out  of state and then the Commission  made its decision                                                              
on the record.                                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Can  you respond to his statement  about it being                                                              
the lowest depreciation rate probably in the nation right now?                                                                  
                                                                                                                                
MR.  JACKSON:  Well,  ACS  if  -   well,  I  got  a  petition  for                                                              
clarification from  ACS just yesterday  afternoon, as a  matter of                                                              
fact, and  their interpretation of  the order of which  they admit                                                              
they're uncertain  but the interpretation  of the order  that they                                                              
set forth  in their  pleading, which  I could  furnish you  a copy                                                              
with, is  actually quite  different from  the interpretation  that                                                              
Mr.  Carson gave.  They  admit that  the numbers  he  gave is  the                                                              
possible interpretation  in the one they don't favor.  I think Mr.                                                              
Carson's  interpretation  is  probably   the  right  one  but  the                                                              
Commission's  going  to have  to  tell  us  what they  meant.  The                                                              
Commission doesn't  actually - the  issues that were  presented to                                                              
the Commission  weren't to set a  rate. The issue that  was put to                                                              
the Commission  was to determine  the life of the  various assets.                                                              
The lives  that the Commission  set are  well within the  range of                                                              
the same lives  that are used by other companies,  both here, both                                                              
what  were used  for ACS  previously.  The problem  is that  ACS's                                                              
plant is already  very, very largely depreciated.  In other words,                                                              
if it  cost $100, they've  already depreciated  in general  a very                                                              
significant portion  of that,  over 60 percent,  so the  amount of                                                              
money they have  left to recover when you apply the  lives to that                                                              
small amount  that they have left  to recover produces a  low rate                                                              
but the problem  is is that they're essentially  over depreciated.                                                              
They've  collected too  much depreciation  from  customers in  the                                                              
past  so  the  formula,  after  you   set  the  lives,  which  the                                                              
Commission  set  well within  the  standards  or well  within  the                                                              
parameters of other  companies, but when you apply  those lives it                                                              
comes out  to a small rate  because they've already  recovered too                                                              
much depreciation from their customers.                                                                                         
                                                                                                                                
CHAIRMAN  TAYLOR: Who  makes the  decision about  too much  or too                                                              
little depreciation?                                                                                                            
                                                                                                                                
MR. JACKSON: Too  much is really a mathematical  conclusion in the                                                              
sense that  if -  this methodology  gets extremely  complex.  If I                                                              
remember the numbers correctly, they  have already recovered six -                                                              
it was 60 something percent. I don't  remember where in the 60s it                                                              
was -  high 60s  percent. Nationwide,  the FCC  has recently  said                                                              
that  that same  ratio nationwide  is at  an all  time high  of 52                                                              
percent so ACS is quite a bit above  what has been said by the FCC                                                              
to be an all time high for the nation  as a whole. In terms of too                                                              
high, that  is really a comparison  of - this is getting  more and                                                              
more  complex,  a very  simple  example  is  that when  you  think                                                              
depreciation,  you probably  think of  - say that,  say the  asset                                                              
cost $100 and  it has a ten-year  life so you just divide  $100 by                                                              
10 years and  you take $10 each year. That's  called straight line                                                              
depreciation. The utilities use a  much more complex formula which                                                              
is called  remaining life  depreciation  methodology which  is you                                                              
determine say,  if you're five years  into the life of  the asset,                                                              
you determine  how many years not  [that] it had at  the beginning                                                              
but how  many remaining  years it  has in it's  life and  then you                                                              
divide  not  the  original  cost   but  the  remaining  amount  of                                                              
undepreciated value that needs to  be depreciated over that period                                                              
of time and the statement of more  or less is a comparison of what                                                              
dollars or what rate you would get  with the whole life versus the                                                              
remaining  life  methodology.  As  I  said,  it's  complicated.  I                                                              
probably didn't  do all  that great a  job explaining it  but it's                                                              
comparing the two numbers.                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR:  But the reason  that you intervened was  to make                                                              
certain that  you ended up with  the lowest number  possible being                                                              
granted  to ACS  because  a higher  number  would  then justify  a                                                              
higher loop charge - right?                                                                                                     
                                                                                                                                
MR.  JACKSON: The  item that  was  specifically at  issue was  the                                                              
access charges we pay as a long distance phone company.                                                                         
                                                                                                                                
CHAIRMAN TAYLOR:  Okay, access charges.  Charges or fees  that you                                                              
are currently  paying would either  remain the same,  because they                                                              
obviously  had  an  approved  interest  rate  before  this  filing                                                              
occurred, so  those rates are either  going to remain the  same or                                                              
go  up. And  the  way  you make  those  rates  come down,  is  you                                                              
petition to  the Commission  and have  the Commission adjust  that                                                              
rate down based on the testimony  and evidence that they find, for                                                              
a lower  interest rate  because a lower  interest rate  means they                                                              
get to recover less of a fee per  year out into the future. Right,                                                              
because they're depreciating less each year.                                                                                    
                                                                                                                                
MR.  JACKSON:  Some of  the  procedural  mechanics that  you  went                                                              
through are  not entirely correct.  For access charges for  one of                                                              
their companies,  there's  a mandatory annual  filing that  didn't                                                              
really have anything to do with petitions,  they could go up, they                                                              
could  go down.  But,  if  your ultimate  point  is  yes, we  were                                                              
certainly arguing  a case in order  to keep our access  charges as                                                              
low as reasonably possible. It's  certainly true we were trying to                                                              
keep our rates down.                                                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR: Okay,  and  you said  these  have a  significant                                                              
impact on  rates. What percentage  of your  rate is driven  off of                                                              
ACS's depreciation rate?                                                                                                        
                                                                                                                                
MR. JACKSON: I do not know.                                                                                                     
                                                                                                                                
MS. TINDALL: Access charges count  for something between 60 and 70                                                              
percent of our gross revenues as  a long distance carrier so it is                                                              
a...                                                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR:  Not the  access charge,  the gross charge.  What                                                              
percentage  of that  gross charge  is driven off  of the  interest                                                              
rate?                                                                                                                           
                                                                                                                                
MS. TINDALL: The depreciation rate?                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR: The depreciation rate, I'm sorry.                                                                              
                                                                                                                                
MS. TINDALL:  I think the  depreciation rate  was one of  the most                                                              
significant components in the rate  case. That's my understanding.                                                              
                                                                                                                                
MR. JACKSON: ACS was applying - I  think what Dana was saying, ACS                                                              
was applying  for an  increase and  a significant  portion  of the                                                              
increase  they  were requesting  was  because of  their  requested                                                              
increase   in  depreciation   rates.   They   were  requesting   a                                                              
substantial increase  in depreciation rates over  their previously                                                              
current depreciation.                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: It is complex. Thank you.                                                                                      
                                                                                                                                
MS. TINDALL: To sum up - oh, I'm sorry.                                                                                         
                                                                                                                                
SENATOR COWDERY: I'm gonna go back  to what you said earlier about                                                              
nationwide rates  and ACS's was in  the high 60s or  somewhere and                                                              
the nationwide  rates had to do with  50 percent or 52  percent or                                                              
something. These are figures that  I kind of jotted down here. And                                                              
this nationwide rate,  is that comparing apples to  apples? I mean                                                              
we're  in Alaska.  Do they  have the same,  you know,  we got  the                                                              
expense of serving customers nationwide as we do here in Alaska.                                                                
                                                                                                                                
MR. JACKSON:  Senator, through the Chair,  it's not a rate,  it is                                                              
the percentage of their original  cost that's already been written                                                              
off to depreciation  so I don't  know of any particular  reading -                                                              
although costs might start out higher  in Alaska because of Alaska                                                              
costs.  I  certainly  don't  know  any reasons  why  the  rate  of                                                              
depreciation versus the rate of a  new plan would differ in Alaska                                                              
versus the Lower 48. Perhaps someone  else has a reason. I know of                                                              
no reason that that would be.                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: One  other thing on that same subject.  If I were                                                              
to come into  a community like Juneau and  hypothetically purchase                                                              
the Juneau telephone company and  I pay $10 million for it. On the                                                              
books, their assets  may have been depreciated  down significantly                                                              
before I purchased it. Do I start  off as my basis for purposes of                                                              
depreciation  in these schedules  with the  purchase price  that I                                                              
paid for it?  Do I start off  with what they would call  a stepped                                                              
up basis,  a new  basis, or  am I  fixed with  the previous  guy's                                                              
depreciation and his schedule.                                                                                                  
                                                                                                                                
MR.  JACKSON:  Senator  Taylor,  pursuant  to  the  long  standing                                                              
precedent going back to when I first  began practicing at the APUC                                                              
in 1983, which  is based, in large part, on  the interpretation of                                                              
a  state statute.  The rate  base of  the utility,  which is  what                                                              
you're  really  referring  to, is  limited  to  the lower  of  the                                                              
purchase price or the rate base of the prior utility.                                                                           
                                                                                                                                
CHAIRMAN  TAYLOR: That's  what I  meant so  if you  buy a  utility                                                              
that's been pretty well depreciated  down, you're stuck with their                                                              
depreciation  base? How  do  you ever  recover  the difference  in                                                              
price?                                                                                                                          
                                                                                                                                
MR. JACKSON:  Senator Taylor, it's  an interesting question  but I                                                              
suppose  given  the  fact  that   it's  a  very  well  established                                                              
precedent, you really  have to ask why would you  ever pay so much                                                              
extra.                                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: Well  you'd have to ask the question,  I think in                                                              
Alaska today, why would anybody be  so stupid as to go out and buy                                                              
one if somebody  could come in and bootstrap right  off of you and                                                              
ride  your back  at  a lower  rate and  compete  against your  own                                                              
customer base,  why would anybody  be so stupid  as to buy  one of                                                              
these things.                                                                                                                   
                                                                                                                                
MR. JACKSON: I suppose you'd have to ask ACS since they did.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: And I guess you  agree with that proposition as I                                                              
stated it, huh?                                                                                                                 
                                                                                                                                
MS. TINDALL: We would never call ACS stupid.                                                                                    
                                                                                                                                
CHAIRMAN  TAYLOR: No.  I'm suggesting  that  it's hard  for me  to                                                              
understand,  and  I  think  it's  been  hard  for  this  panel  to                                                              
understand, and  the consumers out  there, why nobody  is willing,                                                              
your company  in particular and ACS,  to build new wire  and stick                                                              
it out  there. I'm not  going to talk  about the one  little thing                                                              
you did with  Aurora. Nobody wants to  do this so instead  I see a                                                              
letter  to the  editor from,  and  I don't  know which  one of  my                                                              
lobbyist friends drafted that for  her, but from Robin Ward of the                                                              
Homebuilders' Association  who tells the world that  they couldn't                                                              
get copper put into a subdivision  so they had to go to the RCA to                                                              
get the RCA to  order ACS to put the copper in.  Well, we now know                                                              
why, don't we?  Because the cost of putting the  copper in they're                                                              
not going  to recover  back  if, in fact,  you throw  a saddle  on                                                              
their backs,  so to  speak, by  having access  to those  very same                                                              
lines and  then go  into that  very same  area and undersell  them                                                              
based on  the lower rate  that you've been  allowed by the  RCA to                                                              
charge so  you could  discount, and basically,  break them  on any                                                              
new installation  they put in. I  don't see an incentive  for them                                                              
to put in a new installation. At  least that's kind of the general                                                              
statement we had and so I'm kind  of concerned. We're not going to                                                              
see new technology  and we're not  going to see new  investment as                                                              
long as  you have anybody  in a position  like GCI is  today where                                                              
they can merely  go to the Commission, get a lower  rate than what                                                              
actual costs were, and then compete  head-to-head at a lower rate.                                                              
Maybe  you can  explain  to me  how that  system's  going to  work                                                              
because it doesn't look to me like it's going to.                                                                               
                                                                                                                                
MS. TINDALL: Senator  Taylor, that is certainly  an assertion that                                                              
ACS  has made  before  this  committee  and before  other  bodies.                                                              
Elsewhere they've  made other assertions. Before the  RCA in their                                                              
rate case  they said they  were entirely rebuilding  their network                                                              
and bringing fiber to every home. They've told...                                                                               
                                                                                                                                
CHAIRMAN TAYLOR:  Just a second,  Dana. I'm not talking  about the                                                              
assertions made by  you guys or the assertions made  by them. What                                                              
I'm talking  about is a  principle of  economics that both  of you                                                              
just nod  your head  and agreed with  me on. How  are we  going to                                                              
have people  investing  in the future  of Alaska,  putting  in new                                                              
copper if someone  can ride their  back at a lower rate  than what                                                              
it  actually cost  them to  get in  there and  compete with  them?                                                              
That's the question and I don't really  care what they've asserted                                                              
or what  you've asserted. Each side  has their arguments  to make.                                                              
But, just as a matter of concern  for the state and its consumers,                                                              
how  are  we  going  to get  people  to  invest  and  build  these                                                              
facilities?                                                                                                                     
                                                                                                                                
MS.  TINDALL:  My understanding  of  the  purpose of  the  federal                                                              
Telecommunications  Act was  that it was  structured to  encourage                                                              
technology and investment and rates  were structured - the forward                                                              
looking, total element  long run way of setting rates  was done so                                                              
that it  would encourage the  incumbent to become  more efficient,                                                              
lowering their  costs, and to try  new technology. I  think that's                                                              
working  according to  ACS's testimony  before the  RCA. They  are                                                              
planning to  do that. They put in  a new system to meet  the State                                                              
of Alaska's need when they won that  bid. GCI is testing telephony                                                              
over cable  this summer and we  plan to launch it  sometime within                                                              
the next year. I think that the notion  that there won't be - well                                                              
let me just  say, I disagree with  the notion that there  won't be                                                              
new technology in telecommunications  in this state and I disagree                                                              
that  any  of this  is  going  to bring  about  universal  service                                                              
problems.                                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR:  Okay, so  you believe there  will be  growth and                                                              
there will be development and capital  will come in on my question                                                              
to build copper?                                                                                                                
                                                                                                                                
MS. TINDALL:  If copper is the  least cost, most efficient  way to                                                              
go, then  I'm sure  that there  will be  systems built on  copper.                                                              
It's looking  now more  like it's  going to  be fiber or  wireless                                                              
technology or  telephony over  cable but that  was the  purpose of                                                              
the Act.  Copper is an  old technology  and it's probably  not the                                                              
least cost  and it  doesn't support  high speed  data systems  so,                                                              
presumably, you would want new systems  in that are lower cost and                                                              
will support high speed data systems. Okay, I'd just like to...                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: I appreciate it,  really, I do because I think we                                                              
need to hear from all sides on this  as to where future investment                                                              
is  going to  come from  and  how we're  going  to maintain  these                                                              
systems that we currently have 'cause  I think we're all concerned                                                              
about that.                                                                                                                     
                                                                                                                                
MS. TINDALL:  I would just like  to summarize that I've  heard Wes                                                              
Carson  say  that he  believes  that  the  RCA is  setting  policy                                                              
instead of implementing the Act and  that he would like to see the                                                              
decisions  that they  make  reviewed by  an  independent panel.  I                                                              
would  submit  that  their  decisions  have been  reviewed  by  an                                                              
independent panel.  The Alaska Superior Court has  reviewed almost                                                              
every one  of their decisions 'cause  almost every one of  them on                                                              
this  issue have  been appealed  and the  RCA has  been upheld  on                                                              
these issues. The Alaska Supreme  Court, on a number of cases, has                                                              
denied  review, although  there are  some things  that are  before                                                              
them now. That  is an independent panel. I don't  believe when the                                                              
Commission    is   upheld    on    appeal    by   following    the                                                              
Telecommunications Act that you can  say, or anybody can say, that                                                              
they're  setting policy.  They  are not  forging  ground where  no                                                              
one's gone before.  I think we would have heard about  it from the                                                              
courts. I  think the  courts have  reviewed their decisions,  have                                                              
upheld  them  and found  that  they  were following  the  policies                                                              
established by the Telecommunications  Act and the FCC. Thank you.                                                              
                                                                                                                                
CHAIRMAN TAYLOR: Anything further? Questions? Senator Cowdery.                                                                  
                                                                                                                                
1:43 p.m.                                                                                                                       
                                                                                                                                
SENATOR  COWDERY: The  other day  we asked some  questions  at the                                                              
hearing talking about the lodge and  things of that nature and I'd                                                              
asked my secretary  to write down the questions that  we had asked                                                              
for you and I've tried to review  the response I got back from you                                                              
people and...                                                                                                                   
                                                                                                                                
CHAIRMAN  TAYLOR: Before you  go into  that could  I just  ask one                                                              
question of Dana?                                                                                                               
                                                                                                                                
SENATOR COWDERY: Yes.                                                                                                           
                                                                                                                                
CHAIRMAN  TAYLOR: Dana,  I have  a letter  here that  was a  copy,                                                              
                   th                                                                                                           
basically, June  24,  I think  it's signed by yourself -  yea - to                                                              
me.                                                                                                                             
                                                                                                                                
MS. TINDALL:  I'm sorry.  You were supposed  to get the  original.                                                              
That was a mistake.                                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR:  I never  have. I  don't know where  it is  but I                                                              
show up  here and I have  Randy Phillips, Senator  Randy Phillips,                                                              
distributing mail that  I thought you were sending  to me and when                                                              
I inquired about  it of Randy he said that Tim  Kelly had given it                                                              
to  him and  that that's  why he  was distributing  it because  he                                                              
thought people ought to know about it.                                                                                          
                                                                                                                                
MS. TINDALL:  Well I  apologize. That was  an oversight.  You were                                                              
supposed to  get the original.  I'd be  happy to track  down where                                                              
that is and provide it to you.                                                                                                  
                                                                                                                                
CHAIRMAN  TAYLOR: That's  okay. It  was kind of  surprising  to me                                                              
when I walked in here. And one other  thing - maybe you could hand                                                              
that down to Dana?                                                                                                              
                                                                                                                                
SENATOR DONLEY:  Senator Therriault and  I were up  at Legislative                                                              
Budget  and Audit.  One of  the items  was -  discussion with  Pat                                                              
Robertson regarding  the audit on  this subject here so  it's hard                                                              
to be in two meetings at that same  time on the same subject. Gene                                                              
chairs Legislative Budget and Audit  and I'm on Legislative Budget                                                              
and  Audit. They're  meeting upstairs  right  now and  one of  the                                                              
things they...                                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Talking to the auditors.                                                                                       
                                                                                                                                
SENATOR DONLEY: Yea - missing that to be here but...                                                                            
                                                                                                                                
CHAIRMAN TAYLOR: Dana, can you tell  me where this thing came from                                                              
or who drafted it or created it?                                                                                                
                                                                                                                                
MS. TINDALL: I would like to defer to Jimmy Jackson on that.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: Yea Jimmy, who did this?                                                                                       
                                                                                                                                
MR. JACKSON:  H-B-J-J stands  for House  Bill Jimmy Jackson.  This                                                              
...[END OF SIDE A]                                                                                                              
                                                                                                                                
TAPE 02-46, SIDE B                                                                                                            
                                                                                                                                
MR.  JACKSON: ...  was in  the second  two  days of  hearings.   I                                                              
talked - I've been in this business  since 1983.  I worked for the                                                              
Commission for  ten years.  I  have a, I think,  good professional                                                              
relationship  with  a lot  of  the  people  who testified  at  the                                                              
Committee.  I, after discussing it  with Dana, thought it would be                                                              
a good idea to try to come up with  a compromise that other people                                                              
might,  might  accept,  including  some  of  the  people  who  had                                                              
testified fairly vigorously  against the Commission.   So, I think                                                              
it was after the first two days of  hearings I initially contacted                                                              
ARECA  and was  referred  to their  attorney,  who  is named  Dean                                                              
Thompson.   And Dean Thompson  and I sat down  in his office  on a                                                              
Monday  morning  to  talk  about   whether  or  not  there  was  a                                                              
compromise  that ARECA might  be satisfied  with and that  Chugach                                                              
might be satisfied with.  Chugach  is a member of ARECA.  He and I                                                              
came up with  some ideas.  If the advisory committee,  the section                                                              
in here on the  advisory committee, if you compare  the items that                                                              
the committee is  supposed to report on, that's  contained in that                                                              
language, to the  ARECA resolution that was passed  back in, well,                                                              
it's  the resolution  that  ARECA  adopted  in February  of  2002,                                                              
you'll notice that there's a great  deal of similarity between the                                                              
items that  that committee's  supposed to look  at and  the things                                                              
which were in the  ARECA resolution.  So after Dean  and I talked,                                                              
I drafted this language  and I shared it with Dean,  who shared it                                                              
with his executive  director, ARECA.  I also - and  then they went                                                              
through looking at it to decide whether  or not they could support                                                              
it.   I also  shared it  with Mr. Gordon  from College  Utilities,                                                              
Golden Heart Utilities  and - to see if it's  something they could                                                              
support because  they also are  quite critical to  the Commission.                                                              
I  don't know  precisely, in  one way  or another,  I believe  Mr.                                                              
Yould referred it,  shared it with Chugach.  I  don't know whether                                                              
it was  only a copy or  discussions.  I  later shared it  with Don                                                              
Edwards, who's Chugach's  attorney.  And that's  how, that's where                                                              
it came from.                                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR:  And to whom in  the Legislature did  you provide                                                              
it?                                                                                                                             
                                                                                                                                
MR. JACKSON:  I provided it to no  one in the Legislature.   And I                                                              
do not,  I'm relatively  sure that  no one at  GCI provided  it to                                                              
anyone in the Legislature.                                                                                                      
                                                                                                                                
SENATOR COWDERY: Did  anyone else that you know provide  it to the                                                              
Legislature?                                                                                                                    
                                                                                                                                
MR. JACKSON:  I think I know  who provided it to  the Legislature.                                                              
I have no direct knowledge of that.                                                                                             
                                                                                                                                
SENATOR COWDERY: Who do you think?                                                                                              
                                                                                                                                
MR. JACKSON: I believe it was Mr. Yould.                                                                                        
                                                                                                                                
SENATOR COWDERY: Mr. who?                                                                                                       
                                                                                                                                
MR. JACKSON: Eric,  excuse, Yould, I apologize.   I believe it was                                                              
Eric Yould.   That is what I have  been told.  I do  not know that                                                              
for a fact.                                                                                                                     
                                                                                                                                
SENATOR COWDERY: That was provided to the House or the Senate?                                                                  
                                                                                                                                
MR. JACKSON:  He's going to testify.   So rather than  my hearsay,                                                              
maybe it would be better to ask him what, if anything, was...                                                                   
                                                                                                                                
CHAIRMAN TAYLOR:  I was  just curious where  it came from  and who                                                              
had drafted  it because it was obvious  that it wasn't  one of our                                                              
drafters or anybody in the Legislature  that had done this because                                                              
they always -  a work number up  here on one side and  they have a                                                              
little different format  for laying it out.  The  fascinating part                                                              
to me was - were those your notes at the top, Jim?                                                                              
                                                                                                                                
MR. JACKSON: I have no idea whose  notes those are.  It was, and I                                                              
touched base with  Eric, it was not my intent that  this be shared                                                              
with  anyone  if   there  were  not  a  consensus   agreed  to  it                                                              
beforehand.    And I  think  my  intentions  there got  just  mis-                                                              
communicated  and lost.   And I'm  not in  any way criticizing  or                                                              
angry about  what he, if he shared  it with someone else.   But it                                                              
was not my intent that it be widely  distributed beyond the people                                                              
that I talked to.                                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: And  you were looking for some  consensus between                                                              
Chugach and others, right?                                                                                                      
                                                                                                                                
MR. JACKSON: We were hoping there could be consensus.                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: Did you get that consensus?                                                                                    
                                                                                                                                
MR. JACKSON: They can speak for themselves.  It's my understanding                                                              
that ARECA supports  the, supported it, or decided  that they were                                                              
in  favor   of  it,   with  Chugach  as   the  dissenter,   is  my                                                              
understanding again,  hearsay.  And  the people from  Golden Heart                                                              
did not decide they wanted to support this.                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Well, out of three, you got one of them anyhow.                                                                
                                                                                                                                
SENATOR COWDERY: If that, you...                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: He said he didn't know who did that?                                                                           
                                                                                                                                
SENATOR COWDERY: Can you read that?  Can you help?                                                                              
                                                                                                                                
MS. TINDALL: It's not our writing.                                                                                              
                                                                                                                                
SENATOR COWDERY: What do you think it says, Mr. Chairman?                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: It looks to me like  it says, 'Okay to share with                                                              
executive  managers   but  not  for,'  looks  like   attribute  or                                                              
attribution,  probably,  'attribute as  GCI  proposal.'   My  code                                                              
reading here is  probably not any better than anybody  else's.  My                                                              
secretary does  a really  good job at  deciphering mine,  which is                                                              
almost impossible to  read, but... I was just curious  to where it                                                              
came from  and I appreciate the  candor of your answer  very much.                                                              
You had additional questions?                                                                                                   
                                                                                                                                
SENATOR COWDERY: Yeah,  and you know, the other day  we asked, and                                                              
I looked in it, and who, we was asking about the lodge.                                                                         
                                                                                                                                
MS. TINDALL: The lodge?                                                                                                         
                                                                                                                                
SENATOR COWDERY: Is  there just one lodge out there  that GCI owns                                                              
or is there...?                                                                                                                 
                                                                                                                                
MS. TINDALL:  Senator, with  due respect,  it's not  a lodge.   We                                                              
call it  a Walk.   It's  not a  commercial entity.   It's  a large                                                              
cabin.  But there's only one, in answer to your question.                                                                       
                                                                                                                                
SENATOR COWDERY: GCI or Mr. Duncan  doesn't have two lodges or two                                                              
facilities out in that area?                                                                                                    
                                                                                                                                
MS. TINDALL:  I believe Mr. Duncan  owns a personal cabin  for his                                                              
family somewhere  in that area.   But it's  not related to  GCI at                                                              
all.                                                                                                                            
                                                                                                                                
SENATOR COWDERY: The testimony the  other day said something about                                                              
30 or 40 minutes with a Beaver or  a turbo Beaver to get there.  I                                                              
happen to be a pilot myself.  Could  you show me on this map where                                                              
the lodge is located?                                                                                                           
                                                                                                                                
MS.  TINDALL: Would  it  make it  easier,  Senator  Cowdery, if  I                                                              
stipulated to, Senator Halford already  looked it up and told me I                                                              
was wrong, it was only a 10-minute  flight.  But not being a pilot                                                              
myself and not  liking small planes, maybe it  seemed longer, like                                                              
30 minutes, to me.                                                                                                              
                                                                                                                                
SENATOR COWDERY:  Well, I  thought that  the Commissioner  was the                                                              
one that said the 30 minutes or 40 minutes.                                                                                     
                                                                                                                                
MS. TINDALL: I think that was my testimony.                                                                                     
                                                                                                                                
SENATOR COWDERY: Well, okay.                                                                                                    
                                                                                                                                
MR. JACKSON: I'd be happy to mark it for you.                                                                                   
                                                                                                                                
SENATOR COWDERY:  Yeah, please, if you  would.  And also,  it said                                                              
it's never been  operated as a commercial or profit,  for a profit                                                              
basis?                                                                                                                          
                                                                                                                                
MS. TINDALL: That's correct.                                                                                                    
                                                                                                                                
SENATOR COWDERY:  And then  I thought  you said  also that  it was                                                              
owned by Neil Burt [ph] prior to this?                                                                                          
                                                                                                                                
MS. TINDALL: Prior to GCI.                                                                                                      
                                                                                                                                
SENATOR COWDERY: And then, was it a lodge before he acquired it?                                                                
                                                                                                                                
MS. TINDALL: I don't believe so.   But I, I mean, I don't believe,                                                              
I was  speaking in  that letter of  GCI's ownership.   But  I also                                                              
don't  believe  any   previous  owners  have  operated   it  as  a                                                              
commercial lodge.                                                                                                               
                                                                                                                                
SENATOR COWDERY: Okay.                                                                                                          
                                                                                                                                
MS. TINDALL: You know, it's got four bedrooms.                                                                                  
                                                                                                                                
SENATOR   COWDERY:   Yeah,  but   you   said  that   this   thing,                                                              
congressional people have been out there, like Senator Stevens.                                                                 
                                                                                                                                
MS. TINDALL: Senator  Stevens, Senator Murkowski  with his family,                                                              
have all been out there.                                                                                                        
                                                                                                                                
SENATOR COWDERY:  And so, and was  Senator Stevens out  there just                                                              
with family or was  he with his staff and this and  that or do you                                                              
know?                                                                                                                           
                                                                                                                                
MS. TINDALL: Senator Stevens was  never out there with family.  He                                                              
was generally,  I believe,  to the  best of  my knowledge,  always                                                              
either  hosting  federal  officials  who were  on  a  fact-finding                                                              
mission or on a fact-finding mission himself.                                                                                   
                                                                                                                                
SENATOR COWDERY: And we asked about  the operational costs and are                                                              
they taken as a deduction for tax?                                                                                              
                                                                                                                                
MS. TINDALL: I think I provided you  what we had to offer on that.                                                              
                                                                                                                                
SENATOR COWDERY: How  many employees at the lodge  or the cabin or                                                              
whatever it is?                                                                                                                 
                                                                                                                                
MS. TINDALL: I am, you know...                                                                                                  
                                                                                                                                
MR. JACKSON: How long has it been since you've been there?                                                                      
                                                                                                                                
MS. TINDALL:  I haven't been there  for a year, so I  can't really                                                              
say.                                                                                                                            
                                                                                                                                
SENATOR COWDERY: When you was there - how many?                                                                                 
                                                                                                                                
MS. TINDALL: When I was...                                                                                                      
                                                                                                                                
SENATOR COWDERY: What would you judge?                                                                                          
                                                                                                                                
MS.  TINDALL:  When I  was  there,  there  was four  employees,  I                                                              
believe, maybe five out there.                                                                                                  
                                                                                                                                
SENATOR COWDERY: There's four bedrooms there?                                                                                   
                                                                                                                                
MS. TINDALL: Yes.                                                                                                               
                                                                                                                                
SENATOR COWDERY: So, let's see here,  the, and then I asked you if                                                              
you had filed  any reports to claim any declarations  with APOC or                                                              
the ethics thing on any time.  You  said you was going to get back                                                              
with that.  Have you?                                                                                                           
                                                                                                                                
MS. TINDALL: We  have still, we, as I said in  the letter, we have                                                              
not  filed  any  reports  and  we   are  still  investigating  the                                                              
requirements for those filings and  it is still GCI's intent to be                                                              
fully compliant with the law.                                                                                                   
                                                                                                                                
SENATOR COWDERY: I talked this morning  with APOC.  Maybe we could                                                              
get them  on line if  you, if you  would so,  to ask them  to save                                                              
some time,  if they should be something  you file in there.   This                                                              
is a phone number that, it's an Anchorage phone number.                                                                         
                                                                                                                                
CHAIRMAN  TAYLOR:  Write that  on  a note  and  give  that to  the                                                              
secretary.  She can hook them up, I guess.                                                                                      
                                                                                                                                
SENATOR COWDERY: If we could get Brooke Miles on?                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: In  the meantime, it would seem  to me, well, let                                                              
me back up, I  guess.  You were talking about  lodges with Senator                                                              
Cowdery.  Apparently  Mr. Duncan has  a lodge of his own,  too, in                                                              
that area.                                                                                                                      
                                                                                                                                
MS. TINDALL: No, Mr. Duncan does not have a lodge of his own.                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: So there's only one lodge, there's not two?                                                                    
                                                                                                                                
MS. TINDALL:  There is one facility  that is not a lodge  that GCI                                                              
entertains folks  and does telecommunications demonstrations.   It                                                              
is on the Agulowak River.                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: And do you have  another facility out there?  You                                                              
said there may be another cabin or something.                                                                                   
                                                                                                                                
MS. TINDALL: No, we do not have another facility out there.                                                                     
                                                                                                                                
MR. JACKSON: Mr. Duncan has a personal  cabin at a different, at a                                                              
different location.                                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR:  Right, that's  the question  I was asking.   And                                                              
that different  location is  how much  further on  up the  lake or                                                              
whatever?                                                                                                                       
                                                                                                                                
MS. TINDALL: I don't know.                                                                                                      
                                                                                                                                
CHAIRMAN  TAYLOR:  Do  you  know  if,  in fact,  that  is  also  a                                                              
deductible business expense?                                                                                                    
                                                                                                                                
MS. TINDALL: I believe it is not.  It's his personal cabin.                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: That's  a question. I mean, I don't  know if it's                                                              
a personal  cabin or if  he writes this  thing off as  against the                                                              
business.   And if, in  fact, it is  his quote personal  cabin and                                                              
doesn't write it  off against the business, that's  one thing.  If                                                              
he writes  it off  against the  business, then  the answer  to the                                                              
question  of who  may  have been  entertained  out  there for  the                                                              
purposes of improving or enhancing  GCI's business becomes quite a                                                              
different question, doesn't it?                                                                                                 
                                                                                                                                
SENATOR DONLEY: Ms.  Tindall, I would encourage you,  if you don't                                                              
know the answer, just say you don't  know.  It's okay to not know.                                                              
                                                                                                                                
MS. TINDALL: I don't know, but to  the best of my knowledge it is…                                                              
                                                                                                                                
SENATOR DONLEY: I know you're trying to be helpful, but…                                                                        
                                                                                                                                
MS. TINDALL: …Mr. Duncan's personal cabin.                                                                                      
                                                                                                                                
SENATOR COWDERY: Can we found out then?  Can you find out that?                                                                 
                                                                                                                                
MS. TINDALL: You would have to ask  Mr. Duncan about that.  It has                                                              
nothing to do with the company and I can't answer for it.                                                                       
                                                                                                                                
SENATOR COWDERY:  This one, the Walk  doesn't have anything  to do                                                              
with the company?                                                                                                               
                                                                                                                                
MS. TINDALL: We're not…                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: That's the one that does.                                                                                      
                                                                                                                                
MS. TINDALL: …not talking about that one.                                                                                       
                                                                                                                                
SENATOR COWDERY: Oh, well, I see.                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: But.                                                                                                           
                                                                                                                                
MS. TINDALL: But,  thank you, Mr. Donley, Senator  Donley, you can                                                              
be my attorney any time.                                                                                                        
                                                                                                                                
SENATOR DONLEY:  No, it's just, I,  sometimes folks are  trying to                                                              
be helpful  and they're  trying to  guess at  an answer  that they                                                              
don't really know.  It's better just  to say you don't know if you                                                              
don't know.                                                                                                                     
                                                                                                                                
MS. TINDALL: I don't know.                                                                                                      
                                                                                                                                
SENATOR DONLEY: Because  then everybody kind of goes  off on other                                                              
tangents.  Yeah.                                                                                                                
                                                                                                                                
SENATOR COWDERY: And  if I could follow up?  On  this page I guess                                                              
two of  four, it's got  in the second  sentence, 'Visitors  to the                                                              
Walk include former and current elected  officials.'  And then you                                                              
go into former  vice-president.  Who  are we talking about  of the                                                              
current elected officials?                                                                                                      
                                                                                                                                
MS. TINDALL: Of the current elected officials?                                                                                  
                                                                                                                                
SENATOR COWDERY: That have visited.  Who are we talking about?                                                                  
                                                                                                                                
MS.   TINDALL:  State   elected  officials   or  federal   elected                                                              
officials?                                                                                                                      
                                                                                                                                
SENATOR  COWDERY:  I  don't  know.     You  said  current  elected                                                              
officials.  I'd like to know state.   That's what we're interested                                                              
in.                                                                                                                             
                                                                                                                                
MS. TINDALL: I'm sorry, are you looking  at the spreadsheet or the                                                              
letter?                                                                                                                         
                                                                                                                                
SENATOR COWDERY: The letter.                                                                                                    
                                                                                                                                
MS. TINDALL:  Oh, okay.   Current elected officials  would include                                                              
such people  as Senator Murkowski,  Senator Stevens,  the Governor                                                              
and I would have to look at the spreadsheet to answer further.                                                                  
                                                                                                                                
2:00 p.m.                                                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: Do  you or  does  somebody in  the company  keep                                                              
track  of who  is at  that facility?   Or  is this  based on  just                                                              
recollection?                                                                                                                   
                                                                                                                                
MS.  TINDALL:  We  do  not  keep records  and  this  is  based  on                                                              
recollection.                                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR:  I would think the  IRS would require  some level                                                              
of record keeping for deduction purposes that, maybe not, but…                                                                  
                                                                                                                                
MS. TINDALL: It's my belief we are compliant with the law.                                                                      
                                                                                                                                
CHAIRMAN  TAYLOR: Okay,  is it  possible  that there  may be  some                                                              
state  officials, not  necessarily  elected  officials, but  state                                                              
officials, who are missing from your list?                                                                                      
                                                                                                                                
MS. TINDALL:  That is, to the  best of our recollection,  the list                                                              
of state officials who have been to the Walk.                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: This is your recollection or someone else's?                                                                   
                                                                                                                                
MS. TINDALL:  This is  the recollections  of our General  Manager,                                                              
Wilson Hughes, and Ron Duncan.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: And  I had been informed that  Commissioner Pugh,                                                              
or not Pugh, yes,  Margaret Pugh, had been out there  and her name                                                              
is not on the list.   That's the only reason I was  asking.  Is it                                                              
possible that she may very well have been there, too?                                                                           
                                                                                                                                
MS. TINDALL: I don't know.                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR: Do you know who  it was now that came up with the                                                              
guesstimate  on  what the  cost  should  be for  reimbursement  by                                                              
Commissioner Thompson?                                                                                                          
                                                                                                                                
MS. TINDALL: I think what I told  you last week in my testimony is                                                              
that it was  based to the best  of my remembrance on  the cost per                                                              
day that  we charged employees  at that  time, which we  no longer                                                              
charge employees,  and then the  air fare.   And I don't  have any                                                              
further information on that.                                                                                                    
                                                                                                                                
CHAIRMAN  TAYLOR: You  recall the  trip, though.   Did you  travel                                                              
with Nan and the kids when you went up there?                                                                                   
                                                                                                                                
MS. TINDALL: No.                                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR:  You went up  a different way  than she did  or a                                                              
different time?                                                                                                                 
                                                                                                                                
MS.  TINDALL: As  I testified  last week,  Chair Thompson  arrived                                                              
late.  She came  separately.  And for that reason,  she missed the                                                              
briefing  session  with the  staff  person from  Senator  Stevens'                                                              
office.                                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR:  And do you  know whether or  not she came  up in                                                              
the company jet or whether she came up commercially?                                                                            
                                                                                                                                
MS.  TINDALL:   To  the  best  of   my  knowledge,  she   came  up                                                              
commercially.                                                                                                                   
                                                                                                                                
SENATOR COWDERY: To Dillingham.                                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: Would you have a  record of that?  I mean, flight                                                              
log or anything else.                                                                                                           
                                                                                                                                
MS.  TINDALL:  I  don't  keep  commercial   flight  logs  for  the                                                              
airlines.                                                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: No, no,  no.   Not for  airlines.  Your  company                                                              
does own a jet, doesn't it?                                                                                                     
                                                                                                                                
MS. TINDALL: Not at that time.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR:  At that time you  didn't.  Did you have  a plane                                                              
capable of - I thought you did, but maybe you didn't.                                                                           
                                                                                                                                
MS. TINDALL: No.                                                                                                                
                                                                                                                                
MR. JACKSON: I don't believe we had a jet at that time.                                                                         
                                                                                                                                
CHAIRMAN TAYLOR:  Did you have some  other aircraft that  wasn't a                                                              
jet that  would be called a  turboprop or something else  that you                                                              
were using?                                                                                                                     
                                                                                                                                
MS.  TINDALL:   To  the  best  of   my  knowledge,  she   came  up                                                              
commercially,  which  means  that  she  would  not  have  come  to                                                              
Dillingham in any GCI aircraft.                                                                                                 
                                                                                                                                
MR.  JACKSON:  And I  think  we'll just,  and  I think  Dana  will                                                              
obviously  have  to say,  she  is  not positive  how  Commissioner                                                              
Thompson came, but this is the best of our recollection.                                                                        
                                                                                                                                
CHAIRMAN  TAYLOR: Yeah,  sure.  It's  indicated that  Commissioner                                                              
Thompson paid somebody at GCI $1200.  Is that correct?                                                                          
                                                                                                                                
MS. TINDALL: We were not able to  find records. They - I asked our                                                              
accounting department, maybe if they  had more time, I don't know,                                                              
we  don't  keep  records of  this.    But  we based  that  on  the                                                              
disclosure statement by Chair Thompson.   I'm sure we received it.                                                              
                                                                                                                                
CHAIRMAN TAYLOR: Did you cash it?                                                                                               
                                                                                                                                
MS. TINDALL: I don't work in the accounting department.                                                                         
                                                                                                                                
CHAIRMAN  TAYLOR: Well,  I think  it might be  kind of  important,                                                              
don't you think?                                                                                                                
                                                                                                                                
MS. TINDALL: Um…                                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: Because you see,  if the trip is a gift, and then                                                              
somebody decides later on, 'Gee,  maybe I can't take it as a gift,                                                              
I'd better  send a check.'   And then  the person wanting  to give                                                              
the gift receives the check and never  cashes it and just tears it                                                              
up, it's still a gift.  Isn't it?                                                                                               
                                                                                                                                
MS. TINDALL: I'm pretty sure if we  received a check we would have                                                              
cashed it.  But to my knowledge…                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: You have no way  of verifying any of that at this                                                              
point, do you?                                                                                                                  
                                                                                                                                
MS.  TINDALL: Not  as I  sit here  before you  today.   But to  my                                                              
knowledge, there was never any decision not to cash the check.                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Okay, hopefully  she's got a cancelled check back                                                              
and that takes  care of that, I  guess.  My question,  I guess, is                                                              
if in  fact - you've got  listed, and I  enjoyed that part  of the                                                              
response,  because  apparently every  single  one  of these  state                                                              
officials, the  Governor and his  dog, you know, his  family, when                                                              
we put  up a  column here on  why they  were there, it's  official                                                              
business.    Why   was  Frank  Rue  there?     Official  business.                                                              
Everybody's there  for official business, including  Nan Thompson.                                                              
If they're  there for official  business, how come  you're writing                                                              
off the  expense?  Is  there official  business to be  entertained                                                              
and for  you to have  a deduction for  entertaining them?   Do you                                                              
understand what I'm saying?                                                                                                     
                                                                                                                                
MR. JACKSON: I was just going to ask why it was…                                                                                
                                                                                                                                
MS. TINDALL:  Nan Thompson  was invited to  the Walk  for official                                                              
business.  Apparently,  Nan Thompson, according  to her testimony,                                                              
later decided that she had not conducted  enough official business                                                              
to be comfortable  and she reimbursed  GCI.  The purpose  of GCI's                                                              
invitation was for  official business and we have  not invited Nan                                                              
Thompson back to the Walk since then.                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: Well…                                                                                                          
                                                                                                                                
MR. JACKSON: And Senator, I initially  thought you were asking the                                                              
same question  that Dana  just answered.   But then when  you went                                                              
on, I  wasn't sure  if that's  the question  I asked.   It  is our                                                              
understanding that,  I mean, the  fact that they were  on official                                                              
business doesn't  have anything to do  with whether or not  we can                                                              
deduct it  for income  tax purposes.   If  the expenditures  are a                                                              
business expense for us under the  IRS regs, then we can deduct to                                                              
the extent that's allowed by the IRS regs.                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR:  Yeah, I think we  all understand that  aspect of                                                              
it.  But a business deduction is  something that directly impacts,                                                              
enhances the business.  I mean, it's like advertising.  You deduct                                                              
advertising  because   you're  going  to  pay  money   to  provide                                                              
advertising out there  in the media so people  will participate in                                                              
and  use your  business.   That's  the same  reason that  business                                                              
expenses are allowed  if you're going to hire a  lobbyist and have                                                              
them take  somebody out  for dinner.   That's a business  expense.                                                              
All I was asking  about is if in fact this is  a business expense,                                                              
then  either   your  interpretation   is  wrong  or   Commissioner                                                              
Thompson's  interpretation  is  wrong.    And that's  what  I  was                                                              
getting at.                                                                                                                     
                                                                                                                                
MR. JACKSON:  And I'm the person,  I am the person who  decided to                                                              
put yes  in that column  next to Chair  Thompson's name  because I                                                              
did not  fill out  the - I  did not  develop that document  there.                                                              
Wilson Hughes  put it together and  discussed it with people.   He                                                              
had  not  put  Chair  Thompson's  name  on there.    I  put  Chair                                                              
Thompson's  name on  there even though  I thought  it was  obvious                                                              
that, you know,  from the discussion that we all  knew that.  When                                                              
I came to that  column and I scratched my head  and from our point                                                              
of view, we thought she was going  out there on official business,                                                              
which is  the reason  I put 'yes'  on that column.   She  ended up                                                              
thinking  it  wasn't  official  business  so  perhaps  she  has  a                                                              
disagreement with us about whether or not it was.                                                                               
                                                                                                                                
SENATOR COWDERY: And  then I think we asked - maybe  I asked - the                                                              
Chairman, she  said that  she decided a  month later  or something                                                              
that it  wasn't so she  wrote the $1200 check.   And I  also asked                                                              
her then  if it wasn't  official business,  did she have  a leave,                                                              
did she  take leave.   And I  think she was  going to,  she didn't                                                              
know, so she was going to get that  back, but we'll, after that, I                                                              
guess, when we get  that, so…  Anyway, the thing  of APOC, I don't                                                              
know, do we have anybody on line yet?                                                                                           
                                                                                                                                
SENATOR COWDERY: Brooke Miles.                                                                                                  
                                                                                                                                
MS. BROOKE MILES: Mr. Chairman, this is Brooke Miles.                                                                           
                                                                                                                                
SENATOR COWDERY: Hi, this is Senator Cow…                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: Excuse me, go ahead, Senator Cowdery.                                                                          
                                                                                                                                
SENATOR COWDERY:  I'm sorry  to keep you  waiting.  We're  here in                                                              
Juneau and  we're in the middle of  a hearing.  Remember  I talked                                                              
to you  this morning about  the requirements  of APOC on  gifts of                                                              
businesses that  their requirement, if  they have to, if,  I think                                                              
you told  me that if  it was over  $100 value  they had to  file a                                                              
declaration.                                                                                                                    
                                                                                                                                
MS. MILES:  Mr. Chairman,  yes to Senator  Cowdery.   The lobbying                                                              
law does  require that an  employer of  lobbyists, or a  client of                                                              
lobbyists,  disclose  all  gifts that  are  more  than $100  in  a                                                              
calendar  year.   In addition,  and  I apologize,  I've only  been                                                              
online for a portion of your hearing, Mr. Chairman…                                                                             
                                                                                                                                
SENATOR COWDERY: Would you turn that up a little?                                                                               
                                                                                                                                
MS. MILES: …this were the nature  of official business, they would                                                              
be reportable in  any amount as expenditures connected  with their                                                              
lobbying activities.                                                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR:  So,   this  is  Chairman  Taylor.     So  as  a                                                              
consequence,  it's your  interpretation that  no matter how  this,                                                              
this was  designated, whether  it was designated  by the  giver as                                                              
official business  or by the person  receiving it as  not official                                                              
business,  that   that's  not  a  relevant  definition   for  your                                                              
purposes.   For your purposes, any  gift over $100 by  an employer                                                              
of a  lobbyist to  a state  official must  be reported.   Is  that                                                              
correct?                                                                                                                        
                                                                                                                                
MS. MILES: That's  correct, Mr. Chairman.  And in  addition, if it                                                              
were not a gift but [indisc.] this  trip on official business.  If                                                              
I  may,  just   for  example,  occasionally  oil   companies  take                                                              
legislative staff  and other public  officials to Prudhoe  Bay to,                                                              
on official business, to look at  the operation there so that they                                                              
can make determinations.   And those trips are reportable.   So if                                                              
it was  for some reason  official business  to take people  to, on                                                              
the trips in question, those would  have been reported anyway even                                                              
if they weren't considered gifts.                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: Okay, to whom?                                                                                                 
                                                                                                                                
MS. MILES: [Indisc.] law would require their being reported.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  To whom would  a commissioner in  Ms. Thompson's                                                              
position report to?   Because the state official  is also required                                                              
to make a report, aren't they?                                                                                                  
                                                                                                                                
MS. MILES:  That would be  correct.   My understanding of  it, and                                                              
Mr.  Chairman, APOC  isn't responsible  for  the executive  branch                                                              
ethics act,  but my  understanding of  it is  that trips  that are                                                              
gifts  or  trips  that  are  in  association  with  your  official                                                              
business,  your official  state employment,  are reported  to your                                                              
ethics  supervisor,  much  as legislators  and  legislative  staff                                                              
report them to your Legislative Ethics Committee.                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: Okay, and so, apparently  the Governor or someone                                                              
appoints a ethics supervisor for  commissioners and folks that are                                                              
seated in these positions, these official capacity positions?                                                                   
                                                                                                                                
MS. MILES:  That's correct.   Each department in  State government                                                              
has its designated ethics supervisors.                                                                                          
                                                                                                                                
CHAIRMAN  TAYLOR: Can  you  tell me  what  that designated  ethics                                                              
supervisor does when they receive a report like this?                                                                           
                                                                                                                                
MS. MILES: I only  know, because I'm not one, Mr.  Chairman, but I                                                              
only know when you've  completed, it is in writing  and it goes to                                                              
the designated  ethics supervisor and then whether  they're public                                                              
information, I just don't know that.  I'm sorry.                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: I  guess that's  the question  is how would  any                                                              
report of this type ever become public?                                                                                         
                                                                                                                                
MS. MILES: Certainly any reports  that are made under the lobbying                                                              
law are public information.                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Yeah,  but if someone chose not  to report as GCI                                                              
did  in the  quarter we're  talking about  and they  put down  not                                                              
applicable or  n/a, is the initials,  if they chose not  to report                                                              
and Chairman Thompson  at a later time decides,  'Whoops, probably                                                              
wasn't what  it was supposed  to be,  my interpretation is  it was                                                              
more  of a gift  so I'm  going  to turn  myself in  to the,  to my                                                              
designated ethics person.'                                                                                                      
                                                                                                                                
MS. MILES: Right.                                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: Okay.   If it doesn't show up in  the APOC report                                                              
and it only  goes to the designated  ethics guy, how  does anybody                                                              
in the  public ever  know that  such a  report was  ever filed  by                                                              
anybody?                                                                                                                        
                                                                                                                                
MS.  MILES: Mr.  Chairman, I  again,  I apologize  for being  non-                                                              
responsive to that question.  But  because it's not a law that the                                                              
Public Offices  Commission  administers, I'm  not aware of  what's                                                              
public  and  not public  and  how  they're  housed or  if  summary                                                              
information is published or any of  the information that may be of                                                              
use to you.  I am very sorry.                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR:  Yeah, well, we  do have an  AG here with  us and                                                              
she may have that information for us.                                                                                           
                                                                                                                                
MS. MILES: Oh, good.                                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR:  And I thank  you for that.   My only  concern is                                                              
that the purpose  of having APOC is so that there  would be public                                                              
reporting  on  activities  of officials.    And  I know  that  the                                                              
executive branch is also covered  by the same ethical constraints.                                                              
And  as a  consequence,  I'm concerned  because  of the  extensive                                                              
testimony   we've  had   before   this  Committee   of  ex   parte                                                              
communication how  would a party  to litigation, a case,  in front                                                              
of the APUC, or  now the RCA, how would one of  those parties ever                                                              
know that the person deciding their  case had been entertained for                                                              
two or  three days  at one  of the  litigants' private  lodge?   I                                                              
mean,  how would  you, I guess  my, it's  not a  question you  can                                                              
answer, but…                                                                                                                    
                                                                                                                                
MS. MILES: Well,  Mr. Chairman, if I may.  There  is another place                                                              
where  public  officials  are required  to  file  their  financial                                                              
disclosure  reports under  Alaska Statute  39.50.   And I  believe                                                              
that  the   regulation  commission,   the  Regulatory   Commission                                                              
commissioners  are  required to,  they  would  be under  that  law                                                              
required to  show gifts that are  more than $250 in  the preceding                                                              
calendar year.   And those are public information.   Now, I do not                                                              
have them  in front of me,  but I would  be glad to have  my staff                                                              
pull them for your Committee.                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR:  Yeah, if  you would please.   Because  those are                                                              
filed with your agency?                                                                                                         
                                                                                                                                
MS. MILES:  Those are filed  with our  agency and they  are public                                                              
information.                                                                                                                    
                                                                                                                                
SENATOR COWDERY: And the statutes are 24, 24.45 and 24.60?                                                                      
                                                                                                                                
MS.  MILES: 24.45,  Mr. Chairman,  is the  regulation of  lobbying                                                              
law.   24.60 is legislative  ethics.  And  AS 39.50 is  the public                                                              
officials' financial disclosure law.                                                                                            
                                                                                                                                
SENATOR COWDERY: 39.50?                                                                                                         
                                                                                                                                
MS. MILES: Correct.                                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR:  And would you check  that out for us  please and                                                              
if you  could get  back to the  Committee as  soon as possible  on                                                              
that?  If you  could, just fax it down to the  President's office?                                                              
President Halford's office.                                                                                                     
                                                                                                                                
MS. MILES: Sure.   I could do  that.  There will be,  I don't know                                                              
off-hand how  many commissioners  there are,  but there  are eight                                                              
pages for each person.                                                                                                          
                                                                                                                                
CHAIRMAN  TAYLOR:  Yeah,  the  timeframe   we're  looking  for  is                                                              
            rd                                                                                                                  
apparently 3   quarter of, I guess it's 2000,  but I thought, then                                                              
I thought it was, but maybe this one here is, it says…                                                                          
                                                                                                                                
MS. MILES: It would be on their 2001 financial disclosure.                                                                      
                                                                                                                                
CHAIRMAN TAYLOR:  Well, the  one I'm looking  at is 2000  for that                                                              
year and apparently 3rd quarter but…                                                                                            
                                                                                                                                
MS. MILES: Okay that should help very much.                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Okay.  Thank you very much.  I appreciate…                                                                     
                                                                                                                                
MS. MILES: I'm going to sign off now and get this ready for you.                                                                
                                                                                                                                
CHAIRMAN TAYLOR: Understood.                                                                                                    
                                                                                                                                
SENATOR COWDERY: Appreciate that.                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: Any further questions for her?                                                                                 
                                                                                                                                
SENATOR COWDERY: No.                                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR:  Okay, thank  you very much.   If you  wanted to…                                                              
If I could turn  to your letter again there and on  the back of it                                                              
you included  a list  of GCI regulatory  cases that were  probably                                                              
pending  before the  Commission at  the time that  this trip  took                                                              
place.                                                                                                                          
                                                                                                                                
MS. TINDALL: Yes.                                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: Is that right?                                                                                                 
                                                                                                                                
MS. TINDALL: Yes.                                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: And when you made  your decision to list her trip                                                              
as official business,  which one of these cases  did that official                                                              
business pertain to?                                                                                                            
                                                                                                                                
MS. TINDALL: It didn't pertain to any of those.                                                                                 
                                                                                                                                
MR. JACKSON: I made the decision.                                                                                               
                                                                                                                                
MS.  TINDALL:  And   let  me,  I  feel  I  need   to  clarify  any                                                              
representations I have made to the  Committee in case there's some                                                              
confusion.   I have not  testified that  any ex parte  contact has                                                              
taken place with  any member of the Commission between  GCI or the                                                              
Commission.  So I'm hoping you're  not thinking that the fact that                                                              
we and Senator  Stevens invited Chair Thompson out  to the Walk to                                                              
brief an FCC staff person is my testimony  that there was ex parte                                                              
contact, because there was not.                                                                                                 
                                                                                                                                
CHAIRMAN  TAYLOR:  Let  me  just remind  you  that  your  previous                                                              
testimony, and we have a transcript  if you want to check it, when                                                              
I asked the question  about Ted Stevens, because  he keeps getting                                                              
used  as some  kind  of excuse  around here,  that  it wasn't  Ted                                                              
Stevens, that it  was your lobbyist, your attorney  in Washington,                                                              
D.C. who  invited Lisa Sutherland  to come  to the lodge  with her                                                              
children.   It was not  Ted Stevens.   Now that was  your previous                                                              
testimony and  so to just suggest  once again that it  was somehow                                                              
Ted who  initiated this  trip and that  you were just  helping out                                                              
Ted  Stevens by  having Nan  there, that  isn't what  you told  us                                                              
under oath last time.                                                                                                           
                                                                                                                                
MS. TINDALL:  With all  due respect, Senator  Taylor, what  I said                                                              
under oath last  time is that Senator Stevens  required, from what                                                              
my lobbyist  told me, Senator  Stevens required his  staff person,                                                              
Lisa Sutherland,  to  have a background  briefing  in telecom.   I                                                              
suggested  to my  lobbyist, to  Bill  Phillips, that  it might  be                                                              
better  to have a  third party  neutral expert  do that  briefing.                                                              
Bill thought that  was a great idea.  He took it  back to Lisa and                                                              
the Senator.  They  thought that was a great idea.   And that I am                                                              
not  sure, I  believe  is what  I  testified, I  am  not sure  who                                                              
actually  issued the  invitation.   I was kind  of saying  Senator                                                              
Stevens  and  myself,  we  invited her,  we,  Bill  Philips,  Lisa                                                              
Sutherland,  all the  people  that  discussed this  issue.   So  I                                                              
believe that's my testimony.                                                                                                    
                                                                                                                                
MR. JACKSON:  And Senator,  since you asked  your question  in the                                                              
context of the  'yes' under the official business  and I'm the one                                                              
that  put the  'yes'  there  so I  want  to answer  your  question                                                              
directly.   It  had absolutely  nothing to  do with  any of  those                                                              
dockets  that's  listed  in  the  letter  to  you.    Nothing  was                                                              
discussed regarding  any of those dockets.  The  reason that 'yes'                                                              
was put there  was because the  intended purpose of the  visit was                                                              
as just  described by Dana  Tindall, for Commissioner  Thompson to                                                              
discuss the legal issues with Senator Stevens' aide.                                                                            
                                                                                                                                
MS. TINDALL: Not legal issues, telecommunications issues.                                                                       
                                                                                                                                
MR. JACKSON: Telecommunications issues.                                                                                         
                                                                                                                                
MS. TINDALL: Telecom 101.                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: I understand that.                                                                                             
                                                                                                                                
SENATOR COWDERY: But that didn't happen.  I mean, that…                                                                         
                                                                                                                                
MS. TINDALL:  No, Chair Thompson was  late and Jimmy and  I had to                                                              
do the briefing ourselves and we  really wished Chair Thompson had                                                              
been there.                                                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR:  Can I  ask  you  this one?    Is GCI  the  only                                                              
operator of telecommunications gear in the state?                                                                               
                                                                                                                                
MS. TINDALL:  No, my  understanding is that  ACS leases  a fishing                                                              
lodge from CIRI  and provides the same services to  the same types                                                              
of  elected officials.    I  don't have  a  complete  list of  who                                                              
they've had  out to their  lodge.  And I  don't know if  they give                                                              
telecommunication  demonstrations.     I  don't  know   what  they                                                              
discuss.   I don't know if  it's ex parte  or not.  But  no, we're                                                              
not the only ones.                                                                                                              
                                                                                                                                
CHAIRMAN TAYLOR: That wasn't the question I asked.                                                                              
                                                                                                                                
MS. TINDALL: Oh, I'm sorry.                                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR:  I asked you if  in fact, and I'm  assuming other                                                              
people have fishing lodges, too,  and that's nice of you to put it                                                              
in.   But the  question that  I was  asking was:  is GCI the  only                                                              
people  in the  telecommunications business  in Alaska?   I  think                                                              
that's what I said.                                                                                                             
                                                                                                                                
MS. TINDALL:  We  are not,  but we are  the only  ones offering  a                                                              
unique  wireless broadband  technology  in rural  Alaska at  urban                                                              
rates.   And we're quite  proud of it  and we like  to demonstrate                                                              
it.                                                                                                                             
                                                                                                                                
CHAIRMAN  TAYLOR:  So, when  Lisa  is  requested, either  by  your                                                              
attorney or by yourself or whoever  to come out here, did you call                                                              
up the competition  or anybody else and say, 'Hey,  we're going to                                                              
have a  staffer out here  and we're going  to be entertaining  the                                                              
Commissioner and why don't you guys drop in too?'                                                                               
                                                                                                                                
MS. TINDALL:  I'm sorry,  I didn't catch  the whole thing.   Could                                                              
you repeat that please?                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: I mean, did you  call up the competition and say,                                                              
'By the  way, we're going  to have the  Commissioner out  here and                                                              
we're  going  to  have  Lisa Sutherland  and  we're  going  to  be                                                              
teaching them  all about the industry.   Do you guys want  to come                                                              
in or participate?'                                                                                                             
                                                                                                                                
MS.  TINDALL:  No,  it's  our understanding  that  Lisa  would  be                                                              
getting  a   briefing  from  ACS   and  others,   other  telephone                                                              
companies,  separately.  I  think Senator  Stevens' office  does a                                                              
good job of talking to all of the  telephone companies and getting                                                              
their  point  of view.    And there  are  times  when we  all  get                                                              
together and do things together and  bring in FCC staff person and                                                              
some  of those  trips to  the Walk,  that was  the origination  of                                                              
that, some of those trips to the  Walk.  But this particular trip,                                                              
no, we did  not invite ACS  because it was our  understanding that                                                              
ACS would have a separate opportunity to brief Ms. Sutherland.                                                                  
                                                                                                                                
CHAIRMAN  TAYLOR: You mentioned  FCC commissioners  had also  been                                                              
out there?                                                                                                                      
                                                                                                                                
MS. TINDALL: Yes.                                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: How many and when?  If you can remember.                                                                       
                                                                                                                                
MS. TINDALL:  I believe  Chair Connard [ph]  was out there  at one                                                              
time.    And  I  think  that  was  part  of  an  Alaska  Telephone                                                              
Association organized  trip where ACS and the rest  of the ATA was                                                              
involved and  each group  had time alone  with the Chair  and took                                                              
them to their favorite fishing spot.   Commissioner Rochelle Chong                                                              
was out there and  I'm not sure whether that was  the result of an                                                              
ATA sponsored trip or not.                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR:  Do you know whether  the feds have got  any such                                                              
restrictions on reporting?  Do you  have to fill out any forms for                                                              
them?                                                                                                                           
                                                                                                                                
MS. TINDALL: No.                                                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: That  says, 'Hello, federal  government,  by the                                                              
way, we were  entertaining a commissioner  of the FERC and  by the                                                              
way, we had  cases pending before the  FERC at the time.'   Do you                                                              
have to do that for the feds?                                                                                                   
                                                                                                                                
MS. TINDALL: I don't believe so.                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: Apparently you don't have to do it here either.                                                                
                                                                                                                                
SENATOR COWDERY: I think you do.                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: Go ahead, Senator Cowdery.                                                                                     
                                                                                                                                
SENATOR COWDERY: Anyway,  in your opinion, a couple  of questions.                                                              
We've had  many, many people testify  that, that it's too  long to                                                              
make a decision.  Would you say that,  what is your, would be your                                                              
response?  They got  too much work to do or they got  too big of a                                                              
workload?   They don't  listen too  much?  Or  whatever.   I mean,                                                              
what would your answer be why they're so far behind?                                                                            
                                                                                                                                
MS. TINDALL: I'm  going to defer to Jimmy Jackson  just because he                                                              
wants it so much.                                                                                                               
                                                                                                                                
SENATOR COWDERY: I see a lot of body language there, Jimmy.                                                                     
                                                                                                                                
MR. JACKSON:  I apologize if I waste  your time.  I served  at the                                                              
Commission for ten  years, including several with  your friend Don                                                              
Scherer [ph].  I went to work for  the Commission in 1984 and when                                                              
I was  being interviewed  for the  job, the  chairman at  the time                                                              
Carolyn Guess, I said to her that  prior to that I had represented                                                              
the consumer advocacy  program.  And I said to her,  'I'm not sure                                                              
these utilities are  going to be very happy when they  see me as a                                                              
hearing officer  given that I come  from fighting them  in several                                                              
of these  cases.'  Carolyn  said, 'You  know, the thing  that they                                                              
complain about  the most is how long  we take and if  you can make                                                              
things go faster, they'll like you  just fine.'  The entire time I                                                              
was there,  every single  time there was  a sunset the  Commission                                                              
got raked  over the  coals for  taking too  long.  The  Commission                                                              
takes too  long, the Commission always  has taken too long  and it                                                              
always will  take too long in  the eyes of the  regulated utility.                                                              
It  is  part of  the  process.   It  is  always  going to  be  the                                                              
perception that it should happen faster.                                                                                        
                                                                                                                                
SENATOR COWDERY: I agree, but...                                                                                                
                                                                                                                                
MS. TINDALL: Let  me just add to that.  I was  joking with another                                                              
party, it was an  electric company, I'm not even  sure who it was,                                                              
but a  small electric  company, and  I commented,  'You know,  one                                                              
utility's  delay  is another  utility  or customers'  due  process                                                              
rights.'  And that's the nature of the beast.                                                                                   
                                                                                                                                
SENATOR COWDERY: I've heard that  some of these as old as 15 years                                                              
and haven't  got a  final decision.   We've heard  a lot,  I heard                                                              
about I think  a, maybe a Tesoro,  I don't know, a  pipeline thing                                                              
and I also heard that several times  it's five or six years in the                                                              
waiting.   So it seems,  I believe everybody  works hard,  I'm not                                                              
saying any  of the Commissioners  are, you  know, I think  they're                                                              
doing what.   But I  think their workload  personally is  too big.                                                              
That's what  I think.   So, so anyway, that's  what I was  kind of                                                              
wondering what  you thought was the,  was the reason, I  mean, the                                                              
reason,  everybody  complains, that's  not  really  a reason,  you                                                              
know.                                                                                                                           
                                                                                                                                
MS. TINDALL:  The only  docket that  I've experienced that's  been                                                              
open somewhere close to 15 years  was at the FCC, and that was our                                                              
petition  to  open the  Bush  to competition.    It's  soon to  be                                                              
closed, I think.   At least they put out a rule making  on it.  We                                                              
haven't experienced  those  types of delays  at the  RCA.   We did                                                              
experience  what we  thought were  not so  much delays  as just  a                                                              
total dismissal  without an  order at the  former APUC.   Sure, we                                                              
would like  the RCA to  come in on  their white horses  and settle                                                              
cases the day we file them.                                                                                                     
                                                                                                                                
SENATOR COWDERY: That's not realistic.                                                                                          
                                                                                                                                
MS. TINDALL: But it's not realistic.   So sure, we can gripe about                                                              
delays because  in our  business delays  advantage the  incumbent.                                                              
And so  we're acutely  aware of any  delays but  we try to  take a                                                              
balanced approach.                                                                                                              
                                                                                                                                
SENATOR COWDERY:  And do you  feel, how do  you feel, GCI  or ACS,                                                              
which one gets the most favorable treatment?                                                                                    
                                                                                                                                
MS. TINDALL:  You know I  think that ACS has  a problem.   They do                                                              
have a problem.                                                                                                                 
                                                                                                                                
SENATOR COWDERY: I mean, what is…                                                                                               
                                                                                                                                
MS. TINDALL: And  that problem is that they don't  have the law on                                                              
their  side.  The  simple fact  is that  the FCC  and the  federal                                                              
courts have  set this law.   And ACS  can argue it's  unfair until                                                              
the cows come  home and they will.   But their problem  is not one                                                              
of bias, it's  not one of unfavorable treatment,  it's simply that                                                              
they don't have the law on their side as our courts have found.                                                                 
                                                                                                                                
SENATOR COWDERY: So,  the short answer, would you  say then is GCI                                                              
gets more  favorable treatment  than ACS,  regardless of  who's at                                                              
fault?                                                                                                                          
                                                                                                                                
MS. TINDALL: I would not say that, no.                                                                                          
                                                                                                                                
SENATOR COWDERY: Well, I thought that's what you said.                                                                          
                                                                                                                                
MS.  TINDALL:  No, I  think  that the  RCA,  like the  courts,  is                                                              
dispensing decisions fairly.  It's  the law that is ACS's problem.                                                              
                                                                                                                                
SENATOR COWDERY: So  who gets the, back to the  original question,                                                              
who has the most favorable decisions in your opinion?                                                                           
                                                                                                                                
MS. TINDALL: No one.                                                                                                            
                                                                                                                                
SENATOR COWDERY: The majority of the time?                                                                                      
                                                                                                                                
MS. TINDALL: No one, Senator.                                                                                                   
                                                                                                                                
SENATOR COWDERY: The majority of the time?                                                                                      
                                                                                                                                
MS. TINDALL: We win the majority  of the time because we argue the                                                              
law and it's upheld in the courts.                                                                                              
                                                                                                                                
SENATOR COWDERY: That's all I was  wanting to know.  Who wins the…                                                              
                                                                                                                                
MS. TINDALL:  I would love to take  credit for it because  I could                                                              
go in and ask for  a raise.  But I don't think,  you know, I think                                                              
I need to be fair in this.                                                                                                      
                                                                                                                                
SENATOR COWDERY:  I'd like to have  a raise for being  here today,                                                              
but that won't work out either.                                                                                                 
                                                                                                                                
MS. TINDALL: I think you all deserve one.                                                                                       
                                                                                                                                
SENATOR COWDERY: Anyway,  if I could ask one other  question.  And                                                              
then we got  to go to session  here pretty quick, I guess.   There                                                              
was, maybe you don't have it in the  top of your head, but you had                                                              
acquired  right-of-way from  the  State, from  the  DNR, from  the                                                              
Parks, I guess, from the University.                                                                                            
                                                                                                                                
MS. TINDALL: Yeah, one of those groups somewhere.                                                                               
                                                                                                                                
SENATOR COWDERY:  What do  you, you,  anything you  do, you  lay a                                                              
cable, you got to  have a right-of-way.  You pay  for those right-                                                              
of-ways, right?                                                                                                                 
                                                                                                                                
MS. TINDALL: You know, I'm not up  to speed on the status of those                                                              
right-of-ways.  I  know it was the subject of  a legislative fight                                                              
a number  of years ago  and there were  interim steps taken  and I                                                              
don't know if that  was ever finally resolved or  what we ended up                                                              
paying.                                                                                                                         
                                                                                                                                
SENATOR COWDERY: Could  you find out approximately,  you know, and                                                              
these, how much  a mile that you  pay, or what, do you  pay by the                                                              
mile, by the foot or whatever?                                                                                                  
                                                                                                                                
MS. TINDALL: I would have to find out.                                                                                          
                                                                                                                                
SENATOR COWDERY: I'd  appreciate that.  And if you  could get that                                                              
to me, I'd appreciate that.                                                                                                     
                                                                                                                                
MS. TINDALL: Sure.                                                                                                              
                                                                                                                                
CHAIRMAN TAYLOR: Senator Cowdery,  a better place to look might be                                                              
the Resource  Committee hearings  held on that.   And that  was, I                                                              
agree, Dana, probably  three or four years ago.   They were rather                                                              
extensive.   What's  Vic  Fisher's wife's  name?  Jane Angvik  was                                                              
employed  and was a  senior member  of the  Department of  Natural                                                              
Resources  at the  time  and she  wrote a  very  strong letter  in                                                              
opposition  to where  the  Administration was  going  on what  the                                                              
value  of an  intertie right-of-way  should  be and  it was  quite                                                              
controversial because  we had the  railroad charging one  rate and                                                              
then we  had five different state  agencies all wanting  to charge                                                              
different rates  and it was  our understanding that  John Shively,                                                              
who was  then in  charge of  the Department  of Natural  Resources                                                              
with the Governor  and with GCI went  into a room and  figured out                                                              
how to  settle it  and that's  basically the  testimony we  had is                                                              
that they  made a deal.  What that deal -  whether that deal  is a                                                            
good  one or  bad one,  I  was opposed  to  having five  different                                                              
rates. I thought the state just ought  to charge what the ground's                                                              
worth, not  try to make  some kind of  interpretation of  what the                                                              
value of the cable  might be worth that was in  it and that's what                                                              
state agencies  were trying  to do  at the time  but there  was an                                                              
agreement  made between  the Administration  and the company  that                                                              
was satisfactory to  both sides and the best testimony  on that is                                                              
not my reflection, but ...[END OF TAPE]                                                                                         
                                                                                                                                
TAPE 02-47, SIDE A                                                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR:  ...preserved in  the  Resources  Committee.   I                                                              
don't, again, I  don't know if it's a settled issue  and I wish it                                                              
was...                                                                                                                          
                                                                                                                                
MS. TINDALL: I don't know and I don't have any...                                                                               
                                                                                                                                
SENATOR DONLEY: I'm sorry I've got to go get ready for...                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: Go ahead.                                                                                                      
                                                                                                                                
SENATOR DONLEY: ...for the joint session.                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: I understand.                                                                                                  
                                                                                                                                
SENATOR DONLEY: I want to be here, but...                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: We're going to go  to hearing next and that'll be                                                              
after the joint session.                                                                                                        
                                                                                                                                
SENATOR COWDERY:  If you  could, within  the next, hopefully,  the                                                              
next day, give  us a white paper  on, on, say the  parts, crossing                                                              
the parts  of fiber optics  going to  Valdez and up  to [indisc.].                                                              
Is that difficult for you?                                                                                                      
                                                                                                                                
MS. TINDALL:  Yeah, it is.   I've got most  of my staff  here and,                                                              
but I will get it as soon as I can.                                                                                             
                                                                                                                                
SENATOR COWDERY: I would appreciate that.                                                                                       
                                                                                                                                
SENATOR THERRIAULT:  Mr. Chairman, I  don't know why we  can't get                                                              
that from our own State agencies if...                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: That's what I was suggesting.                                                                                  
                                                                                                                                
SENATOR  THERRIAULT: …it's  State  Parks land,  State, just  State                                                              
general land.   We're the State, we've got people  in the building                                                              
right across the street or down the road.                                                                                       
                                                                                                                                
SENATOR COWDERY: I would just like to have that information.                                                                    
                                                                                                                                
SENATOR THERRIAULT: They should be able to pull that together.                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: I  know it was very complex at the  time and very                                                              
confusing to all of us and that a resolve came about.                                                                           
                                                                                                                                
MS. TINDALL:  Yeah, and  I don't  recall how  that happened.   How                                                              
the, whether it  was resolved, whether there was a  deal or not, I                                                              
simply don't recall.                                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR: That's my recollection  of the testimony from Mr.                                                              
Shively at  the time.  Senator  Therriault, you've  been anxiously                                                              
awaiting and I appreciate your patience there.                                                                                  
                                                                                                                                
SENATOR  THERRIAULT:  Thank  you.   One  of  the things  that  was                                                              
discussed  last  week was  this  diversion  process that  RCA  has                                                              
initiated.   I'm just wondering  if you  have an opinion  on that,                                                              
where things can be dealt with in  sort of a lower level, not kick                                                              
it  up to  the quasi-judicial  where  you have  to  have teams  of                                                              
attorneys and discovery.  Do you  have a position on that process?                                                              
                                                                                                                                
MS.  TINDALL: I'm  not sure  that I  heard all  the testimony  and                                                              
Jimmy may  want to  chime in, but  I think  anything that  kind of                                                              
spreads out the workload and allows  for decisions to be made on a                                                              
quicker basis is good.  Somehow there  would have to be some power                                                              
behind a decision  being made at a lower level  because often what                                                              
we find is that if a decision is  made by an arbitrator, say, that                                                              
goes against  ACS, is  the only  one I've  had experience  with on                                                              
this, that they simply refuse to abide by it.  So...                                                                            
                                                                                                                                
SENATOR THERRIAULT: It just strikes me...                                                                                       
                                                                                                                                
MS. TINDALL: Yeah, but other than that...                                                                                       
                                                                                                                                
SENATOR THERRIAULT: Strikes me as  an attempt by the Commission to                                                              
be responsive to  some of the criticism.  But I'm  not sure how it                                                              
applies to  the big  companies versus the  little companies.   The                                                              
little  company's,  of  course, much  more  interested,  I  think,                                                              
because...                                                                                                                      
                                                                                                                                
MS. TINDALL: Right.                                                                                                             
                                                                                                                                
SENATOR  THERRIAULT:   ...they  can't  afford the  attorneys,  the                                                              
banks of attorneys, so...                                                                                                       
                                                                                                                                
MS. TINDALL: We would support something like that.                                                                              
                                                                                                                                
SENATOR THERRIAULT:  And I'm just  wondering if you've had  a look                                                              
at the  bill passed  by the House  and have an  opinion as  to the                                                              
oversight committee mechanism that they want.                                                                                   
                                                                                                                                
MS. TINDALL:  There was  some debate in  the House about  what the                                                              
oversight  committee would  be limited  to  or if  they had  broad                                                              
ranging powers.   We're not opposed  to an oversight  committee to                                                              
make specific process recommendations.   We wouldn't be excited to                                                              
have  an oversight  committee  of  all  the utilities  with  broad                                                              
ranging powers.   That's kind  of a scary  concept to us.   But as                                                              
written in the House bill, we are not opposed to that.                                                                          
                                                                                                                                
SENATOR  THERRIAULT: Okay,  is there  anything else  in the  House                                                              
bill that you have concerns with or...?                                                                                         
                                                                                                                                
MS. TINDALL: We would love to see  the Commission reauthorized for                                                              
four years.  We're  starting to think a compromise  may be more in                                                              
order as, you know, reflect Jimmy  going out and trying to achieve                                                              
a compromise.   We're not opposed  to the House bill.   We support                                                              
it.    But  we   certainly  would  not  want  -   we  believe  any                                                              
reauthorization less  than two years  would be detrimental  to the                                                              
industry.                                                                                                                       
                                                                                                                                
MR.  JACKSON:  And I  can  put just  a  slight footnote  on  those                                                              
answers.   We  think we've  seen the  final bill  that passed  the                                                              
House.   But I'm not  sure that we're  absolutely certain  that we                                                              
saw the final  bill.  So this  would sort of be subject  to review                                                              
that the  bill is  what we  think passed,  the one we're  speaking                                                              
about.                                                                                                                          
                                                                                                                                
SENATOR THERRIAULT: Thank you.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Senator Cowdery?                                                                                               
                                                                                                                                
SENATOR  COWDERY:   How  many  hours   did  the  House,   did  you                                                              
participate in the House bill in testimony over there?                                                                          
                                                                                                                                
MS. TINDALL:  The hearings  went on  for five  hours.  It's  doing                                                              
wonders  for  my diet,  right  through dinner.    But  I think  my                                                              
testimony only lasted about a half an hour, maybe less.                                                                         
                                                                                                                                
SENATOR COWDERY: But the House testimony was about five hours?                                                                  
                                                                                                                                
CHAIRMAN  TAYLOR: Would it  be fair  to say  that the House  bill,                                                              
except for  a couple minor tweaks,  is pretty much  the compromise                                                              
bill that  you were  working on  along with  ARECA and some  other                                                              
folks?                                                                                                                          
                                                                                                                                
MR. JACKSON:  Chairman Taylor,  I looked at  it briefly.   I think                                                              
that  it's fair.    The main,  the  main difference  I  saw was  a                                                              
difference in who appoints the advisory committee.                                                                              
                                                                                                                                
CHAIRMAN TAYLOR: Yeah, the makeup.                                                                                              
                                                                                                                                
MR.  JACKSON: And  I  didn't even  notice the  makeup  change.   I                                                              
honestly have not reviewed it that carefully.                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: I  noted a couple other changes, too.   You had a                                                              
provision in here that required that  once the Commission issued a                                                              
final order,  that they  had to send  a copy to every  Legislator.                                                              
Thank God somebody dropped that one  because I don't think that we                                                              
would know or understand much of what we were...                                                                                
                                                                                                                                
MR.  JACKSON:  It was  only  when  they  were evoking  good  cause                                                              
that...                                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR:  Yeah, yeah.  And  I appreciate your  attempts to                                                              
try  and find  some  teeth that  could be  put  into the  process.                                                              
Senator Donley has  left now because of other  commitments, but he                                                              
and I have been working for several  years with our Alaska Supreme                                                              
Court on exactly the same difficulty  of timeliness of orders.  We                                                              
still have  a few  out there  that are  well over  two and  a half                                                              
years  old from  the  time that  the case  was  argued before  the                                                              
Supreme Court.  And justice delayed  is justice denied.  We've not                                                              
found any very good solutions other  than encouraging the court to                                                              
come up with better rules.  But I  do appreciate the attempts that                                                              
you made in that legislation to try  and find some teeth you could                                                              
put into it and  maybe one of them was notifying  the Legislature,                                                              
you  know, of  good cause,  because  as we  heard testimony,  good                                                              
cause may  have been  overused a  bit by the  Commission.   I just                                                              
wanted to  confirm that  that was the  document that you  guys had                                                              
worked  on and  I'm assuming  that  you played  an integral  role,                                                              
aside from just  the testimony, but with also  the people involved                                                              
in reaching  compromise within the  House and with your  own staff                                                              
of folks here, too.                                                                                                             
                                                                                                                                
MS. TINDALL: Senator Taylor, just  to clarify the record, we spoke                                                              
to Chugach  and ARECA  and Golden  Heart and  we did not  transmit                                                              
that bill to  the Legislature.  So  our role was in  attempting to                                                              
draft a compromise that failed.                                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR:  However it  got there.   But the testimony  that                                                              
we've had today,  you were here,  I believe, for most of  it, both                                                              
of you, from  both Chugach and from  ACS, of course, is  that both                                                              
of those have asked us to vote against  the bill coming out of the                                                              
House because - primarily because  of the extension. So apparently                                                              
we've not  achieved a compromise  that's satisfactory to  at least                                                              
the largest electrical company in  the state. And should the chair                                                              
be rotated, as was suggested?                                                                                                   
                                                                                                                                
MS. TINDALL:  I haven't heard any  reason presented in any  of the                                                              
testimony  that would  make me believe  that the  chair should  be                                                              
rotated.                                                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: Okay.   Do you believe these  timelines are going                                                              
to have sufficient teeth as to at  least accomplish a more uniform                                                              
expectation upon the filing of a tariff or a rate change?                                                                       
                                                                                                                                
MS. TINDALL: Yeah, I was thinking  about that.  I think one of the                                                              
biggest reasons there's  delay at the Commission  is often because                                                              
parties,  well,  in  my  experience,  parties  don't  comply  with                                                              
discovery requests.   And the  Commission has very  little ability                                                              
to penalize  a party that  doesn't comply with  discovery requests                                                              
or  who otherwise  seek  to delay  a  proceeding.   And  so I  was                                                              
thinking  that  in order  for  this  to  be effective,  maybe  the                                                              
Commission, the  Commission needed more  teeth and the  ability to                                                              
penalize  per violation  on a per  day basis  or an  understanding                                                              
that if a party  hasn't come forward with their  discovery burden,                                                              
they may  get ruled against.   But one of  my concerns, I  mean, I                                                              
think  theoretically the  timelines  should work,  but  one of  my                                                              
concerns is  what happens  when you've  simply got a  recalcitrant                                                              
party who  won't comply  and who's  dragging their  feet?   And in                                                              
order  - you've  got to find  some way  for other  parties in  the                                                              
proceeding to still be able to obtain  their due process rights or                                                              
there's going to  be all sorts of appeals and they're  going to be                                                              
before  the  Legislature the  next  time.   So,  next  legislative                                                              
session or perhaps  when the Legislature takes up  the RCA statute                                                              
again, perhaps  they might want  to consider increasing  the RCA's                                                              
ability to fine and sanction utilities.                                                                                         
                                                                                                                                
MR. JACKSON: And  just to back up Dana's testimony  last week, one                                                              
of the  final witnesses  that you  had in  Anchorage was  Don Reed                                                              
from Matanuska  Telephone Association.   And  he described  to you                                                              
that in  contrast to  some of  the other  cases that you've  heard                                                              
about, that  their rate case  went very, very  well.  I  happen to                                                              
know  from having  talked  to both  Don  and the  public  advocacy                                                              
staff,  they  had  not  one  single   discovery  dispute  in  that                                                              
proceeding.   And  that's because  when asked  for discovery,  MTA                                                              
provided it.   Other companies don't necessarily do  that.  In the                                                              
annual access charge  proceedings, which happen  every single year                                                              
for every single  local phone company, the expert  witness that we                                                              
had, who doesn't reside in Alaska  and came to these cases with no                                                              
prior experience  with any of these  companies, when the  case was                                                              
over he  said to  me that  MTA was great  to deal  with.   And our                                                              
expert and  their expert actually  told each other, you  know, 'It                                                              
was  great working  with  you.'   We could  talk  to each  other's                                                              
experts.   We could  find out what  you really  need and  we could                                                              
provide  it.   My  expert  said,  'On the  other  hand,  it was  a                                                              
nightmare  getting  any  information   out  of  ACS.'    They  did                                                              
everything they  possibly could to  provide as little  information                                                              
as  they possibly  could.    That's what  causes  the  case to  go                                                              
slowly.                                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: There's of course  another countering argument to                                                              
that. And  that is  that the  discovery process  can be  abused by                                                              
either side.  And that abuse can  be, I'll give you an  example: a                                                              
non-controversial,  I mean,  everybody  agrees, rate  needs to  be                                                              
changed  2 percent  or something.    So they  put in  for their  2                                                              
percent rate  change.  Instantly  an opposing party  can intervene                                                              
and  then  use  that  rate  case for  the  purpose  of  trying  to                                                              
discovery -  discover every bit  of proprietary information  about                                                              
their competitor  that they might wish  to have.  And  when you've                                                              
got two  people competing  as aggressively  as your two  companies                                                              
have  been, I  can't  help but  believe  that  every advantage  is                                                              
sought by both sides when it comes  to areas of discovery that may                                                              
be  of  benefit for  business  purposes  aside  from the  fact  of                                                              
whether or not it may have something to do with the rate case.                                                                  
                                                                                                                                
MR. JACKSON:  Well Senator, and  because that allegation  has been                                                              
made, I would like to respond.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Right.                                                                                                         
                                                                                                                                
MR. JACKSON:  In the  recent ACS  case, the  information that  was                                                              
designated  proprietary by ACS  was, with  a very few  exceptions,                                                              
seen  only by  outside consultants  who have  absolutely no  other                                                              
relationship with  GCI except for that  rate case.  In  a very few                                                              
instances, the  documents were  seen by myself.   They  were never                                                              
seen  by any  other  person at  GCI so  there  was no  competitive                                                              
advantage to be gained.                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: Even if...                                                                                                     
                                                                                                                                
MS. TINDALL: But, but, but...                                                                                                   
                                                                                                                                
CHAIRMAN  TAYLOR: It's  something  that I  think  a company  would                                                              
resist.                                                                                                                         
                                                                                                                                
MS. TINDALL: But, but...                                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: Just like you would  resist it if they made those                                                              
kinds of requests of you.                                                                                                       
                                                                                                                                
MS. TINDALL: We don't really need  to argue the point because this                                                              
- the reasons parties  may delay cases and has nothing  to do with                                                              
the RCA delaying a case.                                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: That's right. That's  the point that I was trying                                                              
to make, is  that discovery can be  abused by either side.   And I                                                              
was agreeing  with Dana there.   I really believe  this Commission                                                              
needs to  have the ability  to sanction  and impose fees  or fines                                                              
and maybe  even dismiss or  grant cases if  there is a  refusal of                                                              
discovery so as to expedite their case load.                                                                                    
                                                                                                                                
MS. TINDALL: I agree.                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: No, we do. And I  think there's some other items,                                                              
too, I'd like to  ask you about and that is: do  you think that we                                                              
ought to have preemption available?                                                                                             
                                                                                                                                
MS. TINDALL: I think we ought to quit while we're ahead.  Sorry.                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: Do you  think we  ought to  have a provision  in                                                              
here  that  provides for  preemption  of  a commissioner  if  they                                                              
believe there is a bias or cause  using the same standards that we                                                              
use for judges today?                                                                                                           
                                                                                                                                
MS.  TINDALL:  You know,  we  haven't  discussed that.  I  haven't                                                              
thought a  lot about  it. My off-the-cuff  response would  be that                                                              
it's not  necessary because  you have  three commissioners  voting                                                              
and  I'm  not sure  it's  practical  because  you only  have  five                                                              
commissioners altogether.                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: I  think with multiple parties, you'd  run into a                                                              
real problem.   But I just  wanted your thoughts, if  your company                                                              
had any,  on whether preemption was  something that might  be - if                                                              
we could  find a  way of  structuring it,  make it be  considered.                                                              
Another  is  both  within  the timeframes  -  because  that's  the                                                              
biggest  thing,  basically,  the House  has  sent  to us  is  some                                                              
timeframes  here and  a feel-good  look at things  and advise  the                                                              
Commission.  If, in fact, we look  at the judiciary as an example,                                                              
when judges  fail to  get out  decisions on  cases that  have been                                                              
argued, I  think it's  three months,  it may be  six now,  I can't                                                              
remember, they have  to sign an affidavit every  month before they                                                              
get a paycheck  from the state.   And if they are unable  to swear                                                              
and  file  the  affidavit  that   they  don't  have  things  under                                                              
consideration that are older than  six months, then they get paid.                                                              
And of course, if  they can't do that, they don't  get a paycheck.                                                              
And that has  been, as shocking as  this may sound, that  has been                                                              
one  of the  most  motivating  factors  within the  judiciary  for                                                              
getting prompt decisions.   I know for a fact of  judges that have                                                              
lost their  paycheck 17  times is  a, you know,  five or  six year                                                              
period.  One  dear friend of mine,  he ended up almost  every year                                                              
taking all  of his  vacation time  because he  could at  least get                                                              
paid while he was on vacation, and  he would sit there for a month                                                              
at a time  writing up decisions.   And that was solely  because he                                                              
had a hard  time making decisions.   But had it not been  for that                                                              
provision, Lord  only knows  how long it  would have taken  to get                                                              
decisions  from that  person.  And  to some  extent, maybe  that's                                                              
another  tool we  should  be considering  here,  is  some sort  of                                                              
affidavit that  says, 'Yes,  our cases  are current, we're  moving                                                              
through them  and we understand  we don't  get paid if  we haven't                                                              
had them.'  So I just wondered if  you had any thoughts on that as                                                              
another motivating factor.                                                                                                      
                                                                                                                                
MS. TINDALL: It's  possible GCI could support that.   I think we'd                                                              
have to look at the actual language.                                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR: Other questions?   We  have to  go into  a joint                                                              
session  here at  three o'clock,  so  I wanted  to give  everybody                                                              
time.  Eric, I wanted to give you  a chance to testify on the work                                                              
you've done  over on the House side  and how you feel  about this.                                                              
If there are no other questions…                                                                                                
                                                                                                                                
SENATOR THERRIAULT: Mr. Chairman,  before we break.  I just wanted                                                              
to let  you know  that we  did have  a brief  discussion with  the                                                              
legislative auditor during the LB&A meeting.                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: Dave mentioned that.                                                                                           
                                                                                                                                
SENATOR  THERRIAULT:  We  conveyed   to  her  that  you  were  not                                                              
questioning  the audit.   And  we  did have  some questions  about                                                              
whether  or not  the regulated  utilities  that were  part of  the                                                              
audit had  been informed  that everything  was confidential,  that                                                              
auditor's working papers  were by law confidential.   And she said                                                              
there probably was  not an upfront, you know,  sheet or discussion                                                              
informing  that but  it's standard  procedure that  if anybody  is                                                              
expressing any  kind of reluctance  or body language  showing that                                                              
they're  uneasy, the  auditor  clarifies  with them.    So I  just                                                              
wanted to let you know that there was that discussion.                                                                          
                                                                                                                                
CHAIRMAN TAYLOR:  All right.  I have  a lot of faith in  Pat D and                                                              
her staff.   I think they do a  great job.  But, I  guess, Senator                                                              
Therriault, I  can't overlook the  sworn testimony that  we've had                                                              
from  almost  every  utility  about  their  reluctance  and  their                                                              
concerns about retribution.   And I don't work in  that field so I                                                              
don't  know  if  those  are  bona  fide  or  genuine  concerns  or                                                              
thoughts.   But there's  certainly been  almost an unanimity  from                                                              
those who have opposed the Commission  in stating that.  And sadly                                                              
I think  that did  have an effect  on Pat and  her crew  when they                                                              
went out  to talk to  folks is that  they felt reluctant  somehow.                                                              
And I'm  glad you  clarified that  with her  and hopefully  in the                                                              
future they'll notice  everybody right up front and  let them know                                                              
that everything's  confidential and can't be kind  of used against                                                              
them, so to speak.                                                                                                              
                                                                                                                                
SENATOR  THERRIAULT:  Having  reviewed  the  working  papers,  the                                                              
question  was put  to her  about  what was  the type  or level  of                                                              
comment that was  made.  She said for a sunset,  generally the big                                                              
picture that  they're looking at  is whether the entity  should be                                                              
extended.   And she said, with  few exemptions, the  comments were                                                              
that yes they should be extended.   And then there was, 'However.'                                                              
And some  of those 'Howevers' led  to some of  the recommendations                                                              
in the audit,  you know, for the Legislature to  consider making a                                                              
policy call on.                                                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: Have  you had a chance, or did you  have a chance                                                              
to review with  her or with Legislative Budget and  Audit her four                                                              
recommendations and  whether or not they're addressed  in the bill                                                              
sent over by the House?                                                                                                         
                                                                                                                                
SENATOR THERRIAULT: I didn't put that question to her.                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: Yeah, because we  really ought to kind of look at                                                              
that to see whether or not we're  doing that.  Senator Therriault,                                                              
thank you very much. Thank you for  your candor and your patience.                                                              
I  appreciate  both.  We'll  stand in  recess  and  we'll  return,                                                              
hopefully, following  the joint session and we'll take  up Eric at                                                              
that time.  I  have three or four other people  who have been very                                                              
patient  and  wanted   to  add  testimony  that   haven't  had  an                                                              
opportunity to.  But at some point  this afternoon, we need to get                                                              
on with looking  at and hopefully the drafter  will have something                                                              
back to  us a  document where  we can,  and hopefully, you  people                                                              
will be in the room and can participate  with us in what I'm going                                                              
to call kind  of a mark up of  the bill.  So with  those thoughts,                                                              
we'll stand in recess until after the joint session.                                                                            
                                                                                                                                
[MEETING RECESSED]                                                                                                              
                                                                                                                                
TAPE 02-48, SIDE A                                                                                                              
5:05 p.m.                                                                                                                       
                                                                                                                              
CHAIRMAN TAYLOR:  Just at the recess  with GCI and Eric  Yould had                                                              
asked for an  opportunity to come  up and talk a little  bit about                                                              
the current legislation.  The matter now before us  is HB 3001. We                                                              
did not  have that in  our possession earlier,  but we do  now and                                                              
that's what we'll hold the hearing on.                                                                                          
                                                                                                                                
SENATOR DONLEY: Can we get copies of it distributed?                                                                            
                                                                                                                                
CHAIRMAN TAYLOR:  Yeah, we can do  that. We'll get copies  made up                                                              
and  distributed. Eric,  you testified  earlier.  You were  placed                                                              
under oath  at that time. I'll  just remind you that  you're still                                                              
under oath and go right ahead. Give us your full name.                                                                          
                                                                                                                                
MR. YOULD: Thank you very much and  for the record I'm Eric Yould.                                                              
I'm  the  executive   director  of  ARECA.  ARECA   is  the  trade                                                              
association  for the electric  utility industry  for the  state of                                                              
Alaska. My  members generate about  90 percent of  the electricity                                                              
for consumers throughout  the state. My biggest  member is Chugach                                                              
Electric and  we're very  proud to be  able to represent  them, as                                                              
well.                                                                                                                           
                                                                                                                                
Mr. Chairman, I guess we have switched  just a little bit. You did                                                              
have before  you SB 3001  and I was  prepared to comment  on that,                                                              
but instead what  I will do is  comment, if I may, in  favor of HB
3001. Essentially  there are three  elements to this bill  that we                                                              
feel are important and that we very  strongly support. Number one;                                                              
there  are timelines  that establish  definitive requirements  for                                                              
the  RCA in  which  to  accomplish  certain dockets  within  their                                                              
possession. We think  that's very important. It's  an element that                                                              
was passed  by the House  during the  last session that  ARECA was                                                              
very instrumental in helping to have  adopted. In addition, unlike                                                              
what came out of  the House last session, HB 3001  also has a two-                                                              
year sunset extension.  We agree with that. We have  never been in                                                              
favor  of the  four-year sunset  extension.  And, as  a matter  of                                                              
fact,  my  board  of  directors in  February  of  2002  adopted  a                                                              
resolution specifically  requesting a time extension  of no longer                                                              
than two years.  I will have to  tell you that previously  back in                                                              
December we had actually adopted  a resolution for just a one-year                                                              
sunset  extension, but  when it  looked like  the legislature  was                                                              
moving very  fast toward  a four-year, we  felt that we  needed to                                                              
change our position slightly. And  for the record, I would have to                                                              
say  that Chugach  Electric did  not support  the two-year  sunset                                                              
extension. Instead  they supported the one-year  sunset extension.                                                              
Nevertheless,  this   new  bill   does  have  a   two-year  sunset                                                              
extension. We're very much in favor of that.                                                                                    
                                                                                                                                
Finally, the other  thing that this bill does have  which we think                                                              
is important  is the  establishment of a  committee that  will run                                                              
for one  year that  will be  composed of  a number of  individuals                                                              
from the  industry. I think seven  all together, appointed  by the                                                              
governor and  the two bodies  of the  House. This group  would get                                                              
together and address  a number of issues and the  issues that they                                                              
would address  I'm happy to say  comport with the  resolution that                                                              
has been adopted by my membership,  which I'll give you all a copy                                                              
of if you have no objection. Primarily,  the operative things that                                                              
this group  will look at  are how to  reduce the backlog  of cases                                                              
and other  matters pending  before the  commission, how  to revise                                                              
the process of the commission to  ensure that fewer issues must be                                                              
tried   in  a   trial-like  proceeding,   whether  the   deadlines                                                              
established in AS 42.05.175 added  by this section (1) of this act                                                              
require  a further  amendment and  I think  that's important.  The                                                              
areas  for  which  the commission  is  currently  responsible  for                                                              
providing  the  highest public  benefit  and the  areas  producing                                                              
lower  public   benefit  and   identifying  areas  of   regulatory                                                              
oversight that may be eliminated.                                                                                               
                                                                                                                                
So these are  the charges of this one-year committee.  I would say                                                              
that ARECA supports this committee  and this approach to trying to                                                              
streamline the RCA process. As you've  heard from Chugach and as I                                                              
can represent  by many  of my  members, they  are very  frustrated                                                              
with how  long the process  takes. Frankly,  I think that  the RCA                                                              
has a lot  of tools available to  them to ensure that  they can do                                                              
their  work  more  expeditiously,  but  I  think  that  with  some                                                              
direction  from the  legislature  and, perhaps  better  management                                                              
within  the RCA,  we  feel they  can be  a  very good  functioning                                                              
efficient   organization,    frankly,   perhaps,    even   without                                                              
substantial  additional  statute  changes.  There  has  been  some                                                              
suggestion  that  certain  entities   should  not  be  subject  to                                                              
regulation and  that's one  of the things  this document  and this                                                              
committee  will have  us looking  at and  I think  that that's  an                                                              
important element.                                                                                                              
                                                                                                                                
So,  basically, Mr.  Chairman,  I would  say  that ARECA  strongly                                                              
supports this legislation that is  before you and I would be happy                                                              
to answer any  questions, which you might have and  I apologize. I                                                              
didn't  realize that  this  particular  bill was  going  to be  an                                                              
issue.                                                                                                                          
                                                                                                                                
Earlier today,  Mr. Jimmy  Jackson was  called on  as author  to a                                                              
document that  he had  been working with  the industry  leaders to                                                              
try and come up  with a compromise position and he  did come under                                                              
some question from  this committee. And, in fact,  he did approach                                                              
ARECA with  the concept  of coming up  with a compromise  piece of                                                              
legislation.  I told him  my attorney  would work  with him  and I                                                              
told my  attorney that there  were three  things that I  wanted. I                                                              
wanted  the timelines  that we  had in  the House;  I wanted  a no                                                              
longer than two-year  sunset extension; and I wanted  to take many                                                              
of the  elements in  our resolution  and roll  them into  anything                                                              
that would  come out of this  new crafted piece of  legislation. I                                                              
did that  in my CESSNA  182 and went  to my 12  x 16 cabin  in the                                                              
wilderness for the weekend and came  back and low and behold there                                                              
was drafted  the legislation  that  is pretty  much before  you. I                                                              
took a look at it and quite frankly  I was very pleased because it                                                              
addressed almost everything that  we're looking for. I see nothing                                                              
in her  outside of  what we  had been  requesting and that  rather                                                              
surprised me, but  that's fine with me. So, Mr.  Chairman, that is                                                              
how this  piece of legislation  came forward.  I was  contacted by                                                              
Mr. Denny  DeWitt, who is  the legislative aide  to Representative                                                              
Mulder who is the  House sponsor of HB 3001 and  wanted to know if                                                              
I had  anything else  that we would  want to  see included  and at                                                              
that  point in  time I  went ahead  and gave  him this  additional                                                              
language and then he ran with it from there.                                                                                    
                                                                                                                                
SENATOR COWDERY:  Were you and Mr.  Jackson the only  two entities                                                              
that had reviewed this? Is that right?  The one that we're talking                                                              
about?                                                                                                                          
                                                                                                                                
MR. YOULD:  That is  correct. I  don't know  who else Mr.  Jackson                                                              
showed  it  to,  but  basically   it  comported  exactly  with  my                                                              
resolution.  So it answered  my members'  concerns and  so, beyond                                                              
that, as far as we were concerned, this was good.                                                                               
                                                                                                                                
SENATOR  COWDERY:    For  follow up.  You  recommended  areas  for                                                              
regulatory oversight that may be  eliminated. Can you give us some                                                              
ideas what in your particular…?                                                                                                 
                                                                                                                                
MR.  YOULD:   I think  Chugach brought  up a  valid point  earlier                                                              
today.  Perhaps,   public  electric   utilities,  that   is  those                                                              
utilities  that   are  not  investor-owned  utilities   that  have                                                              
governing bodies  of their own, should  not have to be  subject to                                                              
economic regulation,  but I suspect there are some  things we need                                                              
to address  before we come  forward with that recommendation.  And                                                              
that's why  I think the  subcommittee is a  good chance for  us to                                                              
address some of  those issues before we actually  make those kinds                                                              
of proposals.                                                                                                                   
                                                                                                                                
SENATOR  COWDERY: You  know, I  have  a feeling,  you know,  where                                                              
there's  competition  that's  pretty  much  -  what's  wrong  with                                                              
competition  if you  have two  or  more in  competition with  each                                                              
other? Let it apply? What do you think?                                                                                         
                                                                                                                                
MR.  YOULD: Well,  you're getting  into a  totally different  area                                                              
now.  You're  talking  about  total   deregulation  in  which  you                                                              
eliminate  service territory  as well.  This is  what happened  in                                                              
California. And  it has been a  dismal failure in  California and,                                                              
frankly, we as  an industry, with the exception  of Chugach, we're                                                              
not  in favor  of deregulation  of the  industry in  the state  of                                                              
Alaska even  when Enron and California  did not take  place. There                                                              
are  reasons for  that.  One of  the reasons  is  that really  the                                                              
Railbelt  is  the only  portion  of the  state  where  you have  a                                                              
transmission line  that even would  allow for competition  to take                                                              
place between Anchorage and Fairbanks.  In rural Alaska you're not                                                              
even  interconnected;  so  you  have   no  way  of  really  having                                                              
competition  take place. Other  reasons are  that in the  Railbelt                                                              
you only  have three  providers. You  have Chugach, Golden  Valley                                                              
and Anchorage Municipal Light and  Power. So you don't really have                                                              
too  many people  that  could  provide  competition in  the  first                                                              
place. And not only  that, but in the state of  Alaska, unlike the                                                              
Lower 48,  we're pretty much a  public power state  anyway. Ninety                                                              
percent of  our electricity  comes from consumer-owned  utilities.                                                              
In  the Lower  48, it's  almost the  opposite. Almost  all of  the                                                              
electricity comes  from investor owned utilities  and the publicly                                                              
owned  utilities  such  as  co-ops  and munis  are  a  very  small                                                              
minority. In most  states, as Mr. Griffith mentioned  earlier, the                                                              
public utilities are not subject to economic regulation.                                                                        
                                                                                                                                
SENATOR  COWDERY:   I remember  years and  years ago  when we  had                                                              
Alaska Transportation Commission  and we heard all the things that                                                              
was going  to collapse.  The world was  going to collapse  when we                                                              
did away  with that. Well, it  didn't. It seems like  the trucking                                                              
industry  and the  transportation  industry  has survived  without                                                              
that.  So, I  was just  wanting to  know your  opinion. One  other                                                              
question,  unless you  want  to comment  on  that,  but one  other                                                              
question.  I  would  like  more   details  about  what  you  would                                                              
recommend of the committee make up. Who would be…?                                                                              
                                                                                                                                
MR. YOULD:  Let me just make an observation  on your first comment                                                              
there  and  that  is that  the  telephone  industry  went  through                                                              
deregulation.  And  as  a  deregulated  industry,  they  are  more                                                              
dependent on  the Regulatory Commission  of Alaska than  they were                                                              
before they  were deregulated.  They cannot  function without  the                                                              
Regulatory Commission  of Alaska,  which I find quite  incredible.                                                              
So, you've  deregulated an industry  and made them  more regulated                                                              
than before. It used to be that half  the cases that were heard by                                                              
the Regulatory Commission  for Alaska were electric  and the other                                                              
half were telecommunications. Now,  the electric, I think, is less                                                              
than 20  percent. And  most of  it is  telecommunications.  I just                                                              
find  this  an  incredible  indictment   of  the  whole  issue  of                                                              
deregulation, quite  frankly. You're deregulated, but  you're more                                                              
regulated.                                                                                                                      
                                                                                                                                
In terms  of the composition  of the  committee that would  be set                                                              
up, this is the  one area where I stubbed my toe  in that I didn't                                                              
read the composition that closely  and while there's seven members                                                              
on  this committee,  two of  them are  telephone and  only one  is                                                              
electric. I  would rather see only  one telephone on there,  or at                                                              
least  two electric  to go  along  with the  two telephone,  quite                                                              
frankly. Otherwise,  the composition of the committee  as proposed                                                              
is  in  section  7  and it  would  include  one  member  from  the                                                              
commission,  an incumbent  local exchange  carrier, a  competitive                                                              
local  exchange  carrier,  an  electric  utility,  a  natural  gas                                                              
utility,  water  and  sewer  utilities  and  the  public  advocacy                                                              
section of the  commission. So, I believe there  are seven members                                                              
there altogether.                                                                                                               
                                                                                                                                
SENATOR COWDERY: I  wonder how many utilities - I  wonder how many                                                              
things you're regulating now, you  know - water, sewer, pipelines,                                                              
telephones, small, rural electric.                                                                                              
                                                                                                                                
MR. YOULD: Not just small, we represent all the electrics.                                                                      
                                                                                                                                
SENATOR COWDERY: But there are some small.                                                                                      
                                                                                                                                
MR. YOULD: Yes.                                                                                                                 
                                                                                                                                
SENATOR COWDERY: That's all I have.                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR:  Senator Therriault.                                                                                           
                                                                                                                                
SENATOR THERRIAULT:  With regards to the section  that comes right                                                              
out of your resolution  - the process of the  commission to insure                                                              
fewer issues  must be tried in  a trial-like proceeding,  which is                                                              
the  diversion  process that  they  have.  So you  have  concerns,                                                              
criticisms of the current process that RCA has put in place?                                                                    
                                                                                                                                
MR. YOULD:  It's not necessarily  that they've put in  place. It's                                                              
this question of are they doing too  many in a trial-like setting.                                                              
I think the  chair has the authority  to say, 'No, we're  going to                                                              
do this with less  commissioners and we're going to  do fewer in a                                                              
trial-like setting.'                                                                                                            
                                                                                                                                
I  think it's  a discretionary  thing.  You know,  once again  Joe                                                              
Griffith was  right. They have the  authority to cut down  on much                                                              
of  their own  workload  and due  process  and  they shouldn't  be                                                              
afraid as a  judge to lay down  the hammer and say how  it's going                                                              
to be from time to time.                                                                                                        
                                                                                                                                
SENATOR THERRIAULT:  I'm not a judge.  Senator Taylor may  be able                                                              
to  correct me.  You know  there's some  discretion and  decisions                                                              
that get made  - whether it goes  to a jury, whether  it's a judge                                                              
tried, but discovery and all that  is still offered to both sides.                                                              
It seems to me  like the diversion process that they  got to tried                                                              
to do away  with some of that  expense, too. And in one  case that                                                              
was brought up  where the court sent things back  - supposedly the                                                              
decision was made by the court that,  'No, it was an issue of fact                                                              
to be  found.' And  so, I  guess I'm  wondering have  you had  any                                                              
electric issue that's gone into that process?                                                                                   
                                                                                                                                
MR. YOULD:  I don't  know if you  mean into  the process  where it                                                              
naturally goes to court system.                                                                                                 
                                                                                                                                
SENATOR THERRIAULT:  I mean  into the  diversion process  that the                                                              
commission put together.                                                                                                        
                                                                                                                                
MR. YOULD: Well,  you have to understand that ARECA,  itself, is a                                                              
trade association. We're not an electric  utility. Hence, we don't                                                              
have that much exposure to the commission,  per se, but we do have                                                              
exposure and I can  certainly tell you that the one  docket that I                                                              
have before the commission, I am  amazed at how long it has taken.                                                              
It's a  simple rule making  and it's  already taken 28  months. It                                                              
languished for 17 months when it  didn't need to. I mean just flat                                                              
languished  and when  it finally  came up  before the  commission,                                                              
after  they'd  had  three  rounds  of  I don't  want  to  call  it                                                              
discovery,  but public  input and  then one  workshop, which  took                                                              
place  over  a six-month  period  of  time,  then you  would  have                                                              
thought  at some  time  within a  reasonable  time thereafter,  it                                                              
would have  been brought up for  final resolution. Instead  it sat                                                              
for a number of  months and when it finally came  back up, and I'm                                                              
talking something  like 12 months,  the commission said,  and this                                                              
is on  record, 'I don't  think we know  enough about the  issue to                                                              
make a decision.'  Forget the fact  that we just had  three rounds                                                              
of discovery  plus one workshop. Then  they said I don't  think we                                                              
know enough  about the issue.  Let's just  go ahead and  write the                                                              
regulations  and we'll  get public input  through the  regulations                                                              
process. And that's wrong. I mean  they should have adjudicated on                                                              
this when  it was fresh  in their minds  and they already  had the                                                              
information before them.                                                                                                        
                                                                                                                                
I'm just  saying they  could manage their  business better.  And I                                                              
think  that's what  Chugach is  saying,  too. There's  a lot  they                                                              
could do  to manage better.  We've heard  a lot about  due process                                                              
today  and if  they can't  do this  because  something else  takes                                                              
place, then  you have the -  Commissioner Thompson came  before my                                                              
body back in February  on this very docket that I  was telling you                                                              
about at our legislative conference  and when asked why she hadn't                                                              
done  anything with  this  docket,  her response  was,  and I  was                                                              
amazed that she made this response,  'Well, this is the first time                                                              
that I've heard that this is a real issue with you.'                                                                            
                                                                                                                                
Why did we put  this docket in in the first place?  It should have                                                              
not had  to wait  for the  squeaky wheel  to say,   'When  are you                                                              
going to  work on our  docket?' They  should have just  programmed                                                              
this thing into  the future and just gone on with  it. And, I know                                                              
that they  can manage their work  better and I'm sure  that that's                                                              
what much of what this committee will find.                                                                                     
                                                                                                                                
SENATOR THERRIAULT: Thank you.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Senator Cowdery.                                                                                               
                                                                                                                                
SENATOR  COWDERY:  What  about,  you know,  talk  has  been  about                                                              
rotating the chair. What do you think about that?                                                                               
                                                                                                                                
MR. YOULD: I agree.                                                                                                             
                                                                                                                                
SENATOR COWDERY:  When I say  that, I worked,  I served for  a few                                                              
years  on the  Anchorage  Police  and  Fire Retirement  Board  and                                                              
that's what  we did.  We rotated  both sides  every year  and that                                                              
worked pretty good.                                                                                                             
                                                                                                                                
MR. YOULD: Frankly, I haven't asked  that question of my own body,                                                              
but  I've got  real ambivalent  feelings on  that and  one of  the                                                              
reasons I do is  because I frankly think that we  have a very good                                                              
chair.  The  chair  has  a legal  background,  which  I  think  is                                                              
important  for  this  body and  I  look  at  the talents  and  the                                                              
leadership skills of  some of the other members and  while I think                                                              
highly of  them as  well, I think  they have  a good leader  right                                                              
now. I  guess I'm not so  sure I would  like to see it  rotated as                                                              
often as perhaps has been suggested.                                                                                            
                                                                                                                                
SENATOR  COWDERY: But  the leader  is not  managing right.  That's                                                              
what you're saying.                                                                                                             
                                                                                                                                
MR. YOULD: That is correct and, you  know, maybe what they do need                                                              
to do is get back with the old executive  director approach, which                                                              
they used to have, which was done  away with in 1999. I don't know                                                              
if that's a good  idea or not, but I'd sure hate  to see the chair                                                              
having  to manage the  workload.  I'd rather see  the chair  doing                                                              
commission  level type  work  rather than  down  in the  trenches,                                                              
frankly.                                                                                                                        
                                                                                                                                
SENATOR COWDERY:  Thank you.                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: Eric, what about  the difficulty of communication                                                              
in general and  more specifically the difficulty  of communication                                                              
that may in  fact be ex parte.  In other words, may  be advocating                                                              
for your  position where there is  someone out there  that opposes                                                              
that position and never knows that you've had that conversation?                                                                
                                                                                                                                
MR.  YOULD:  Well,  I  have never  had  a  conversation  with  any                                                              
commissioners on a specific docket.  I'm browsing a bit here right                                                              
now  on  one docket.  I  can  tell  you  that, but  I  have  never                                                              
attempted to approach  the commission nor as a general  rule do my                                                              
people to  discuss an  issue. They  will talk  process and  I know                                                              
that the  commissioners will accept  phone calls if they  feel you                                                              
are going  to talk  process, but  they certainly  aren't going  to                                                              
talk to you if  you're going to call them up and  ask them about a                                                              
specific case.  And, as a general  rule, our people don't  try and                                                              
do that.                                                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR:  I understand  that. It may  be a policy  on your                                                              
part.  What  mechanism  is  there   that  provides  you  with  any                                                              
assurance that  that's occurred?  I don't  see any constraint  and                                                              
the  only  constraint  I've  heard  of in  the  testimony  is  the                                                              
distinction between  what's an R docket and what's  a U docket and                                                              
in  fact  in the  e-mails  provided  by  the chairman.  There  was                                                              
obviously  some  confusion  on that  with  Mr.  Rowe when  he  was                                                              
talking with her about whether or  not he felt constrained to talk                                                              
about  a subject  and basically  she said  back to  him, 'Oh,  you                                                              
don't have  to worry  about that.  That's an R  docket and  we are                                                              
only constrained on U dockets.' - or vice versa.                                                                                
                                                                                                                                
MR.  YOULD:   Well, you  know, I  think  that we  have to  appoint                                                              
honorable and honest people and I  think that they have to live by                                                              
the ethics  laws that we have and  we can't all be  walking around                                                              
with policemen tailing  us. We all live by the ethics  laws of the                                                              
state and if there is ex parte that  must prevent all parties from                                                              
not being able to rub elbows with  or have discussions on dockets,                                                              
then, by  golly, that's the  way it's suppose  to be. I  can't say                                                              
that that's the case. Certainly,  there's been suggestions that is                                                              
not the case and I can't judge that one way or the other.                                                                       
                                                                                                                                
CHAIRMAN TAYLOR:   Maybe you  could judge this  for me. Every  - I                                                              
shouldn't say everyone - a significant  majority of those who have                                                              
testified,  several of  whom are  your  members, including  George                                                              
Gordon,  his comments,  Joe Griffith,  as  two pretty  significant                                                              
generators  of that  and several  others, all  talked in terms  of                                                              
their  concerns   or  fears,   paranoias,   if  you  will,   about                                                              
retribution.  The  one subject  we  haven't  talked about  is  the                                                              
opposite of  that. I was taken by  the fact that 13  attorneys who                                                              
practice in front of this commission  all toted right up and wrote                                                              
a letter telling  how wonderful the commission was.  As a judge, I                                                              
think I would  have been very suspicious of that  if the Ketchikan                                                              
Bar  Association would  have written  some  kind of  letter to  me                                                              
saying,  'Oh, you're  the most wonderful  judge  in the world.  We                                                              
think you're great.'  I would have been concerned  about that, but                                                              
somehow I  was given the  impression to  somebody that I  would be                                                              
subject to that type of aggrandizement.                                                                                         
                                                                                                                                
SENATOR  DONLEY:  Anybody  who  didn't  sign it  would  have  been                                                              
conspicuous by their absence.                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Absolutely.                                                                                                    
                                                                                                                                
SENATOR  DONLEY:   I hate that  kind of  stuff, but  I think  that                                                              
takes place in judicial review, also.                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR:   It  does and I  think it's unquantifiable.  You                                                              
can never  quite pin it  down, but everybody  that is  involved in                                                              
the process knows  that that cancer is out there as  a part of the                                                              
thing. Maybe you could just comment  on that, because I sense that                                                              
there are  rewards within this  industry in its  relationship with                                                              
this board  and that  there are 'punishments'  if you  will. We're                                                              
all just  human beings;  we're all  fallible and  maybe these  are                                                              
only perceptions,  but it's those perceptions that  others have to                                                              
live on, too. I wanted your comments on that, if you will.                                                                      
                                                                                                                                
MR. YOULD:  I don't know  if it's human nature  or if it's  a real                                                              
fear and  a real concern.  Certainly, my  members wanted me  to be                                                              
the out front  person opposing this four-year  extension. And they                                                              
adopted  a  resolution  and  they  wanted me  to  be  their  total                                                              
spokesperson, because  many of them said, 'You know,  we've got to                                                              
go before that commission and we're  concerned about retribution.'                                                              
Chugach was one  of them. But to Chugach's credit,  toward the end                                                              
here  they did  become frustrated  and they  have stepped  forward                                                              
and,  frankly, they've  gotten  a  little bit  of  abuse at  times                                                              
themselves. But they  had been concerned, because they  do have to                                                              
go before the commission.                                                                                                       
                                                                                                                                
The  attorneys that  you're  talking about  that  signed that  one                                                              
letter -  I would  tend to agree  with you.  Once the log  rolling                                                              
started,  it was kind  of hard  not to  add your  name to  it. The                                                              
attorney  that I work  with that's  helped me  with some  of these                                                              
amendments, quite  frankly, didn't want his name  even breathed in                                                              
open committee  - that  he was associated  with these  amendments,                                                              
because  maybe  that  would  be perceived  by  his  peers  or  the                                                              
commission in an  adverse way. Frankly, I told him  I didn't think                                                              
that  it was  appropriate  for them  to be  doing  that, but  they                                                              
decided that they  wanted to do it any way. And,  in some respects                                                              
they  did   it  for  the   purpose  of  showing   the  commission,                                                              
themselves, that we're all here and  we care. And so, it's kind of                                                              
- if  your name  is on  that list,  then  you get  a gold star.  I                                                              
understand  where  you're  coming  from,  but  it's  a  subjective                                                              
assessment that I have to give you.                                                                                             
                                                                                                                                
CHAIRMAN  TAYLOR:  Understood,  but  I  appreciate  the  years  of                                                              
experience  that  you've had  especially  as  a director  of  this                                                              
association,  that  I  think  you have  a  perception  there  that                                                              
probably a  bit different  than the average  person on  the street                                                              
and  probably  more  sensitized   to  what  the  concerns  of  the                                                              
membership  are. Though  you spent  most of your  comments  on the                                                              
retribution side, there  appears to be a reward  side, too, around                                                              
here.                                                                                                                           
                                                                                                                                
MR.  YOULD: Once  again Mr.  Chairman,  I can't  comment on  that,                                                              
because I just don't know. I fully  understand where you're coming                                                              
from and I have my suspicions, but I just don't know.                                                                           
                                                                                                                                
CHAIRMAN TAYLOR:  Senator Cowdery,  I think,  was asking  you what                                                              
about the  workload of  the commission.  Aside from the  processes                                                              
and maybe the efficiency or the inefficiency  of the current chair                                                              
and how  she might handle  things, should  that workload  be maybe                                                              
divided up in  some way or split  up in some way so  as to provide                                                              
them with  an opportunity  to be maybe  more expertise in  a given                                                              
area  as opposed  to having  to know  everything about  everything                                                              
that's  under   regulation?  Is  that  something   that  you  have                                                              
discussed with your members?                                                                                                    
                                                                                                                                
MR. YOULD: We  have discussed it, but once again,  you know, we've                                                              
only had one bench  and bar this year. There was  another one that                                                              
we were  supposed to have,  I guess,  just this last  month, which                                                              
didn't  get to  take place  because  of more  pressing issues  and                                                              
those  kind of  discussions still  need to  take place.  I mean  I                                                              
would like  to think  that, yes,  if you  do everything  that's in                                                              
section 7 of  this bill and you get the industry  leaders together                                                              
and you find out  that there is certain things that,  my Lord, why                                                              
are we spending time doing some of  these things that we're doing,                                                              
I'm convinced  that they can shorten  up their time frame.  In the                                                              
House, I  was asked whether  or not we  ought to be  spending more                                                              
money  and  providing   more  staff  and  more   dollars  for  the                                                              
commission, because  everybody seems to  think they have a  lot of                                                              
work to do and  quite frankly I'm not of that  opinion. I think we                                                              
need to take  a hard look at it  and decide if there  are not work                                                              
habits that can  be changed and processes that can  be changed and                                                              
due process  that can  be perhaps changed  that would  preclude us                                                              
having  to  throw  money  at  the problem.  I'm  not  too  sure  -                                                              
convinced - it's a money problem.                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR:   On the advisory committee elements,  and I know                                                              
that was part of your concerns, as  you said, I found it difficult                                                              
to understand  how we  gained anything  here.  This thing is  like                                                              
kissing your sister,  you know what I mean? I  mean you're talking                                                              
about really putting some constraints  on the commission and, yet,                                                              
on page  2, line 23  the first opportunity  for the  commission to                                                              
dodge the  orders is  'reasonably find that  good cause  exists to                                                              
extend the  timeline.' That's under  paragraph (f) and (f)  is the                                                              
paragraph  where  everything  is  supposed  to  happen.  That's  a                                                              
loophole that as  my colleague said on the floor  today, you could                                                              
pilot a super tanker through.                                                                                                   
                                                                                                                                
MR. YOULD: To the extent that both  parties agree to extend or not                                                              
extend, and the commission does say  for good cause we're going to                                                              
extend,  if they  do that,  they have  to at least  report to  the                                                              
legislature or the Legislative Budget  and Audit that, okay, we've                                                              
made the decision  to extend even though both  parties have agreed                                                              
that this  thing can terminate and  the order can go  forward. So,                                                              
there  is a  little  bit of  a punitive  oversight,  if you  will,                                                              
there. I've got  no problem if you want to dock  their pay if they                                                              
don't comport  with the  timelines. As  a matter  of fact,  I even                                                              
discussed that with the chair and  obviously would not have gotten                                                              
her support  if  I would have  pushed  that sort  of thing,  but I                                                              
don't disagree  with you on that  point. There is a bit  of pablum                                                              
in there, but when  we first put those timelines  there, it was at                                                              
a point in time when we weren't quite  sure how much we were going                                                              
to  be able  to get.  I think  the timelines  are reasonable,  but                                                              
you're right. Good cause is pretty easy to declare.                                                                             
                                                                                                                                
CHAIRMAN TAYLOR:  We've had  testimony already  that there  are 58                                                              
cases currently extended  for good cause. That seemed  to be high,                                                              
but there is  another side to that, of course,  that the attorneys                                                              
and others have asked for these delays,  but I have to assume that                                                              
a  good portion  of those  are just  the commission  is unable  to                                                              
quite get to that decision making point, yet.                                                                                   
                                                                                                                                
MR. YOULD:  That is correct  and that is  why it requires  that if                                                              
for good  cause they have to  extend, they can't just  carte blanc                                                              
extend without coming  back to the legislature and  having to say,                                                              
'Well, we've had to extend another  one,' because LB&A is going to                                                              
say, 'Well, why?' There's some watchdog  out there that's going to                                                              
say,  'Why?' Right  now  they can  extend  and  nobody cares,  and                                                              
extend, and  extend and  extend. That's what  we're trying  to get                                                              
away from.                                                                                                                      
                                                                                                                                
CHAIRMAN  TAYLOR: If  anybody's curious,  the legislative  members                                                              
could find  out the  same information  that we  found out  in this                                                              
hearing,  just the  simple request  of the  chair -  how many  are                                                              
sitting  there   and  for  how  long   and  you'd  get   the  same                                                              
information. This  Legislature receives all kinds  of reports from                                                              
different  entities  and agencies  and  so on  and  it was  always                                                              
intended that the  Legislature with this knowledge  would now move                                                              
forward  to do  something. Ninety  percent  of the  stuff I  think                                                              
never gets read or ends up in the  round file some place and until                                                              
something brings  this thing to a  point of focus,  nothing really                                                              
happens on those. That's why I felt  that there wasn't much teeth.                                                              
                                                                                                                                
MR. YOULD: I understand, but I guess  I'd like to think that right                                                              
now there's nothing other than a  couple of self imposed timelines                                                              
that they have  internally that makes them establish  a target and                                                              
say  we're  going to  try  and  make  sure  that we  comport  with                                                              
something  that's in law  and at  least something  is in  law that                                                              
says we  expect you to  be able to  get your business  done within                                                              
these timelines.  If they  don't, then it's  on their  report card                                                              
and next  year you  come back and  you say, 'My  Lord, you  had to                                                              
expand  31 percent of  your cases?  What's the  matter with  you?'                                                              
Right  now you  don't  even  know. I  think  that there's  a  self                                                              
imposing  mechanism by  these  timelines that  at  least says  the                                                              
legislature and law  makers feel that you ought to  be able to get                                                              
your business done  in such and such a time frame.  Right now when                                                              
they're  self-imposed, they  can extend  those whenever they  like                                                              
and nobody knows.  This is as good as we could get  at the time is                                                              
the best I can say.                                                                                                             
                                                                                                                                
CHAIRMAN  TAYLOR: That's  a point  you've mentioned  about two  or                                                              
three times and I'd like you to expand  on that if you could. This                                                              
is as  good as we could  get over there.  This is as good  as they                                                              
would allow us,  I think was another phrase you  used. We wouldn't                                                              
have had the  commission with us  if we didn't do this.  What role                                                              
have these  commissioners played  in the  direct lobbying  of this                                                              
legislation on the House side?                                                                                                  
                                                                                                                                
MR. YOULD:  I don't  know that  they've had  direct lobbying,  but                                                              
when we were trying to get these  timelines in the first place, we                                                              
worked  through Representative  Mulder's  office  and basically  I                                                              
negotiated these timelines with Representative  Thompson. I sent a                                                              
version of  timelines to her and  she sent back, 'My God,  I can't                                                              
live with this.  Let's change it thus.' And we'd  generally make a                                                              
few  changes and  send  it back.  So  there was  a  give and  take                                                              
through the e-mail  process, but we finally got  to something that                                                              
both sides could  live with. And frankly I think  that the RCA was                                                              
being fair  with what they  were trying to  give us, but as  I say                                                              
you can only  go so far. If I  had a requirement in  there that if                                                              
they  missed  a  timeline,  their paycheck  doesn't  come  out,  I                                                              
couldn't have got that. With any process, there's give and take.                                                                
                                                                                                                                
CHAIRMAN  TAYLOR:   That's  a  fascinating  comment,   because  it                                                              
certainly  raises another  major  question with  me  in that  this                                                              
committee about three  weeks ago - I shouldn't say  that, about 10                                                              
or  12 days  ago made  a  direct request  of  the commission,  Ms.                                                              
Thompson,  that  she  provide  this   committee  with  her  e-mail                                                              
communication  with utilities  on  this subject.  Now you've  just                                                              
told me under  oath that you had significant  e-mail conversations                                                              
with the commissioner  back and forth on what  the provisions were                                                              
going to  be in this bill.  That's the bill  that came out  of the                                                              
House.  That's a  bill  that we're  talking  about a  month or  so                                                              
before the  end of this  session. That was  the period of  time in                                                              
which I was inquiring and I've not  received one of those e-mails.                                                              
                                                                                                                                
MR. YOULD: I'm not aware that the request was made.                                                                             
                                                                                                                                
CHAIRMAN  TAYLOR:  The  commissioner  certainly  is.  She  already                                                              
provided me with some and then gave  me a generalized answer that,                                                              
'Oh no, this is all I could find  and basically what we were doing                                                              
was just sending out our position  to various utilities, which was                                                              
our website and  I've shared all that with the  committee members,                                                              
because  that's what we  received.' I'm  assuming the  discussions                                                              
you're having right  now with me involve e-mails  that were taking                                                              
place in April and May.                                                                                                         
                                                                                                                                
MR. YOULD: I believe it was the April time frame, yes.                                                                          
                                                                                                                                
CHAIRMAN TAYLOR:  April? Um  hm. Since then  have you been  in the                                                              
same process?                                                                                                                   
                                                                                                                                
MR. YOULD: Since then?                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: Yes, on this new bill?                                                                                         
                                                                                                                                
MR. YOULD: No, I  have not - not with the commission,  as a matter                                                              
of fact.                                                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: Is  there some liaison or go-between  here in the                                                              
legislature that's working to your  knowledge? In other words, you                                                              
go  and   talk  to   someone,  Mr.   Mulder's  staff,   maybe,  or                                                              
Representative   Mulder  and  you're   informed  that,   'No,  the                                                              
commission won't  go along  with this, because  they say  such and                                                              
such.'                                                                                                                          
                                                                                                                                
MR.  YOULD:  No, basically  I  think  that  Denny DeWitt,  who  is                                                              
Representative Mulder's  aide, said, 'Look, Eric, you  and Nan see                                                              
if  you can't  work  out something  that you  can  both live  with                                                              
here.' That's  basically what  we did. We  trade e-mails  back and                                                              
forth. I frankly don't think there's  a problem with that process,                                                              
but…                                                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR: I'm not suggesting  there's any problem. I'm just                                                              
suggesting  that I  requested the  information and  was not  given                                                              
that information  and I believe  that that kind  of correspondence                                                              
had gone on and  that it had been significant, not  only with you,                                                              
but with  other significant members  of the utility  community who                                                              
are also participating  and actively involved in this.  I can name                                                              
one that's  got four  well-paid lobbyists. I  will have  to assume                                                              
that  they  had  some  interest in  this  and  that  somebody  was                                                              
communicating on it, but I have not  seen any of that nor has this                                                              
committee. I'm  just kind of shocked  at that, Eric, but  in these                                                              
last negotiations,  again you've been meeting with  Mr. DeWitt and                                                              
he's been  telling you  that you  and Nan  have to work  something                                                              
out, because this  is a different bill from the one  that was sent                                                              
over before.                                                                                                                    
                                                                                                                                
MR. YOULD: Actually  it's the same bill with the  exception of the                                                              
two-year extension as opposed to  the four and then it did add the                                                              
committee.  The committee addition  is really  the only  new thing                                                              
other than the two years from the bill that came over before.                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: And  were you assured by someone  over there that                                                              
the administration  and, apparently,  this commission  didn't have                                                              
objection to this edition?                                                                                                      
                                                                                                                                
MR. YOULD: As a matter of fact in  the e-mail that I sent to Denny                                                              
DeWitt,  I even  indicated to  him at  one point  that I have  not                                                              
coordinated   this  with   Nan   just  so   he   knows  that   the                                                              
administration has not had their input on this latest edition.                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: So  somebody would then have to  seek that input,                                                              
I assume?                                                                                                                       
                                                                                                                                
MR. YOULD: If they wanted it.                                                                                                   
                                                                                                                                
SENATOR  THERRIAULT:  We might  want  to  seek comments  from  the                                                              
administration,  but I'm  not  seeking their  approval,  nor do  I                                                              
think that we should. The governor can sign it or veto it.                                                                      
                                                                                                                                
With regard to this process - you  said while it was as good as it                                                              
could get, the commission looking  at these decisions. It seems to                                                              
me  like  as  far as  whether  -  good  cause  is it  -  when  the                                                              
commissioner called  up one of the petitioners and  said we'd like                                                              
you to request an extension or did  it really come from one of the                                                              
two ruling sides  maybe on a tariff case? It just  seems like when                                                              
you say this is as good as we can  get, what do you think would be                                                              
better? Because there  are so many different permutations  of what                                                              
brought us  to the  deadline and  prevented us  from getting  to a                                                              
decision and  we don't  necessarily want to  just say,  'Make your                                                              
best guess.' What would be better?                                                                                              
                                                                                                                                
MR. YOULD:  I guess I'd  like to see  that question levied  of the                                                              
entire industry. I don't have a good answer for you.                                                                            
                                                                                                                                
SENATOR THERRIAULT: So at this point  are you just willing to say,                                                              
'Give notification to the legislature  and LB&A can then say, 'Not                                                              
on this one. Was  it one of the parties that  requested, that said                                                              
they weren't prepared yet?' So they  can figure out if the parties                                                              
are dragging  this  out. And  then they  would have  to go to  the                                                              
parties and  say, 'Did one of  the commissioners suggest  that you                                                              
request that?'                                                                                                                  
                                                                                                                                
MR. YOULD: First of all, it takes  both parties to agree that they                                                              
don't want to see an extension to  take place. If they don't, then                                                              
it's up to the commission to decide  whether there's due cause for                                                              
them  to  give an  extension.  So,  theoretically  the  commission                                                              
wouldn't be  going back  to one of those  two parties  and saying,                                                              
'Would you drag  your feet here? Would you request  that it not go                                                              
forward?'  So  it  would  be  totally  on  the  shoulders  of  the                                                              
commission  to make the  request or  to extend  in the event  both                                                              
parties said, 'We're happy.' Due process is no longer a problem.                                                                
                                                                                                                                
SENATOR THERRIAULT:  I guess  we're heavy handing  this to  such a                                                              
degree if  one party wanted  to extend  and the other  didn't, the                                                              
commissioner  would  call  him up  and  say,  'Don't you  want  to                                                              
reconsider your position?'                                                                                                      
                                                                                                                                
MR. YOULD:  Once  again, it  gets back  to ex parte  and I  cannot                                                              
address that, but  I understand where you're coming  from and yes,                                                              
there is potential for gains.                                                                                                   
                                                                                                                                
SENATOR   COWDERY:  We   heard  earlier   that  our  request   for                                                              
productions  from staff may  be abused,  you know the  information                                                              
and things  like  that. It  was a tool  that was  being used.  How                                                              
would you  handle that?  You don't want  to deny anybody,  but you                                                              
don't want it  abused. It's seems what I heard,  if somebody don't                                                              
like the way things are maybe going,  they just keep delaying with                                                              
these requests.                                                                                                                 
                                                                                                                                
MR. YOULD: I think  that's where the chair, at least  the chair of                                                              
that particular group of commissioners  that are adjudicating that                                                              
case, is going  to put down their  foot and if they feel  that the                                                              
case is  getting dragged out  through parliamentary  procedures, I                                                              
think that they  have to basically let it be known  that they will                                                              
allow no  more discovery  and that enough  has taken place.  Or if                                                              
somebody  comes in  for  a request  for  an extension  of  another                                                              
month, they  just don't  carte blanc give  it to them,  which they                                                              
generally almost always do because  they're afraid of due process.                                                              
I think at times  that the chair of the commission  has got to put                                                              
down their foot.                                                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: Thank  you.  I think  that's  another very  good                                                              
working tool.  Do you  believe they have  to have legislation  for                                                              
that?                                                                                                                           
                                                                                                                                
MR. YOULD: No.                                                                                                                  
                                                                                                                                
CHAIRMAN  TAYLOR:  I  didn't  either.  I  thought  the  chair  had                                                              
sufficient  inherent authority  to establish  rules and  processes                                                              
and procedures before them.                                                                                                     
                                                                                                                                
MR. YOULD: And that's what my biggest member is saying, too.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: Yes,  that's what I thought.  What about amending                                                              
this  provision on  timelines?  And I  think  these timelines  are                                                              
quite generous when  you look at some of them.  Twenty-four months                                                              
on rule  making  and 15 months  on some  of them  and that's  even                                                              
before any report would go into the  legislature. You could be two                                                              
and  a  half  years  into  a  case   or  rule  making  before  the                                                              
legislature  was even  notified and  that's the  only teeth  - the                                                              
notification of the  legislature. What if this were  to be amended                                                              
and  we delete  good cause  and it  can  only be  extended if  all                                                              
parties agree  and if it's not  extended by all  parties agreeing,                                                              
it's granted or  denied? We could put in either  one, couldn't we?                                                              
But I think granted  would probably be the appropriate  one, since                                                              
denial would  be available  to the commission  and then  you could                                                              
refile again, I guess. But at least  you'd have a shot at going to                                                              
court and getting it resolved.                                                                                                  
                                                                                                                                
MR. YOULD:  Well, without the benefit  of counsel, I would  have a                                                              
hard time  saying, but intuitively  I would say that  is something                                                              
my members would support.                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: Well,  really? I know you answered  this earlier,                                                              
but on  rotation of the  chair, if  it were to  be given a  two or                                                              
three year time frame and then rotate,  do you think that would be                                                              
healthy within the body or not?                                                                                                 
                                                                                                                                
MR. YOULD: I guess  I would rather see it be  longer than shorter.                                                              
I have  found that  in being  chair of  certain entities  that you                                                              
become better at  what you're doing the longer  that you're there,                                                              
sometimes. It  takes a while to  learn what it is  you're supposed                                                              
to be doing  and I think that  when you look at a  commission such                                                              
as this,  they come  from various fields.  You get engineers,  you                                                              
get scientists, you get schoolteachers  and so forth and so on. If                                                              
one  member is  a very  good chair,  I would  hate to  see it  get                                                              
rotated to somebody  that's not so good that still  has to come up                                                              
on the  learning curve.  I'm ambivalent on  this issue. I  guess I                                                              
would  rather see  a longer  rotation  than short,  but that's  me                                                              
speaking.                                                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: The  only  reason  I mentioned  it  is that  our                                                              
Supreme Court, which also has five  members, it rotates that chair                                                              
and does  it internally  by electing  who the  next chief  justice                                                              
will be.  I don't have  any particular feeling  for it one  way or                                                              
the  other.   I  only   brought  it  up   because  three   of  the                                                              
commissioners  had drafted  a letter  to  the Governor  indicating                                                              
that they would support rotation  of the chair and they never sent                                                              
that, of  course, and there was  debate and discussion  about, but                                                              
there was at  least testimony by one of the  commissioners that he                                                              
felt  that rotation  of the  chair might  be very  healthy. So,  I                                                              
wanted to get your  members' feeling on that also.  And if it were                                                              
to  occur, do  you  think  it should  be  done internally  by  the                                                              
commissioners themselves, electing  their chair, or should it just                                                              
be done by the governor appointing  their chair or go through some                                                              
normal rotation where  whoever the last one appointed  and has the                                                              
longest term gets to be chair or something?                                                                                     
                                                                                                                                
MR. YOULD: It  should be the peer group themselves  electing their                                                              
own, because  I think they would  know who would be a  good chair.                                                              
I'd rather see that rather than a political appointee.                                                                          
                                                                                                                                
CHAIRMAN  TAYLOR: A  couple  of things  kind  of  confused me  and                                                              
believe  me  in this  field  I've  been  confused since  I  walked                                                              
through the door on it, but it's  got application of timeliness to                                                              
new  and existing  dockets and  that was  apparently an  amendment                                                              
made on the  floor over there. I  had it here a little  bit ago. I                                                              
couldn't understand  what they were trying to do  and I was hoping                                                              
you or somebody else could explain to me…                                                                                       
                                                                                                                                
MR.  YOULD: Originally  the  bill said  that  these new  timelines                                                              
shall apply  only to new  dockets that  are entered after  July 1,                                                              
2002 and  frankly it  was my  industry's concern  that if  it only                                                              
applies to new  dockets, then all those dockets,  the 400 that are                                                              
presently   in  the  system,   are  relegated   to  second   class                                                              
citizenship and  nobody would want to  work on them. [END  OF SIDE                                                              
A]                                                                                                                              
                                                                                                                                
TAPE 02-48, SIDE B                                                                                                            
                                                                                                                                
                                                                                                                                
MR. YOULD: Just to say there's some  timeline that applies to them                                                              
as well. The second sentence...                                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: I  know and that's the one that  had me confused,                                                              
because it says,  'Four dockets commence before July  1, 2002. The                                                              
date of July 1,  2002 shall be used as the date  of filing for the                                                              
purpose of  applying the timelines.'  That sounded to me  like all                                                              
400 of those  dockets kind of move  up, so to speak,  but they get                                                              
counted  as if  a new  docket were  filed,  say, July  1. So,  now                                                              
you've got  401 of them  that all carry  the same date,  but under                                                              
your timelines  none of  these dates  mean a  darn thing  until 15                                                              
months out,  20 months  out. So, you  could have something  that's                                                              
been  pending three  or  four years  and it's  still  going to  go                                                              
another two years past that.                                                                                                    
                                                                                                                                
MR. YOULD:  The alternative  was to make  the commission  sit down                                                              
with  those 400  dockets  and try  and come  up  with a  realistic                                                              
estimate  as  to  how  far  each  one  of  them  were  into  their                                                              
respective times, if you will, and  then establish that as sort of                                                              
the timeline for them. But there  was a lot of objection to making                                                              
the  RCA sit  down  and  have to  go  through these  existing  400                                                              
dockets and establish  a realistic date for where  they are in its                                                              
timeline sequence that we have here  and so it was decided, 'Well,                                                              
it's not a perfect  system and there's got to  be some transition,                                                              
so let's come up  with this procedure instead.' And  I will be the                                                              
first to admit  it's not a perfect solution, but  it's better than                                                              
just  ignoring  all of  the  dockets  that  are presently  in  the                                                              
system.                                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: You said that that  was the best, again, that you                                                              
could get…                                                                                                                      
                                                                                                                                
MR. YOULD: I guess that I wouldn't characterize it...                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: ...that this was a negotiated thing over there?                                                                
                                                                                                                                
MR. YOULD: Late  last night we sat down and tried  to come up with                                                              
something that would  address the 400 dockets  that were presently                                                              
in  the system  and  I had  actually  suggested  the more  arduous                                                              
approach of having the commission  try and establish where each of                                                              
these 400  was in their evolutionary  process and there  was a lot                                                              
of objection to  that and it was felt that this  new process would                                                              
be the way that we would go.                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  And there  was a lot  of objection to  that? Who                                                              
was the objection from?                                                                                                         
                                                                                                                                
MR. YOULD:  Well, during  the committee process,  two or  three of                                                              
the representatives  said, 'Boy, this seems like  an arduous task.                                                              
Perhaps we could craft a compromise  that would work,' and this is                                                              
the compromise.                                                                                                                 
                                                                                                                                
CHAIRMAN  TAYLOR:  I'm assuming  this  didn't  take place  in  the                                                              
hearing. This is back in Eldon's office or some place.                                                                          
                                                                                                                                
MR.  YOULD: As  a  matter of  fact  it was.  Eldon  and the  House                                                              
committee requested that I, Nan and  Denny DeWitt get together and                                                              
see if we couldn't come up with some  language that would help the                                                              
transition  of these  400  dockets to  be  incorporated under  the                                                              
timelines  that are  in  the bill.  Then  that  language was  then                                                              
brought  to  the  House  floor  today,  as  I  understand,  as  an                                                              
amendment to the bill.                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR: And that amendment  passed. So, in fact, you were                                                              
negotiating with  Nan on this  - at least  this portion of  it, of                                                              
the bill?                                                                                                                       
                                                                                                                                
MR. YOULD: I would say yes, yes,  if you want to use that term. We                                                              
were  trying  to come  up  with  some  way  to address  these  400                                                              
dockets.                                                                                                                        
                                                                                                                                
CHAIRMAN  TAYLOR:  And the  best  you  could  get was  a  timeline                                                              
starting July 1 and then we'll go with the rest of the cases.                                                                   
                                                                                                                                
MR. YOULD: That's  what we got. You know, I may  have been able to                                                              
stick in there for something a little more precise.                                                                             
                                                                                                                                
CHAIRMAN TAYLOR: Honestly, Eric,  I'm not trying to be dilatory in                                                              
this questioning. I'm  just trying to find out  what the processes                                                              
were  and whether  you guys  won or  lost, because  I'm much  more                                                              
concerned about  the consumers  and the industry  than I  am about                                                              
taking care  of a commission  that may be somewhat  dysfunctional.                                                              
And I'm  not really interested in  listening to a  commission tell                                                              
me  how we  should  set  policy for  them.  I really  think  we're                                                              
supposed to  be here talking  to you  people and listening  to the                                                              
consumers  about  how  we  can  improve   the  system.  So,  as  a                                                              
consequence I  really want to know  what is a better  way, because                                                              
some  legislator  two or  three  years from  now  is  going to  be                                                              
looking at  400 cases  too that  are still  hanging back  there. I                                                              
know what Senator  Donley had gone through with  the Supreme Court                                                              
and at  least those  guys have caught  up to  the place  where the                                                              
oldest  thing they  got is  probably  two years  and they're  very                                                              
embarrassed by  that because we're  threatening to take  their pay                                                              
checks away from  them if we could to get them  motivated to start                                                              
getting these cases  out, but at least they've worked  with us and                                                              
worked hard  at bringing that stuff  up to date and I'm  sure they                                                              
get assigned new  cases every day and they still  got the old ones                                                              
to take  care of.  Any advice  or recommendation  you can  make to                                                              
this  committee  that will  help  eliminate  that backlog  of  old                                                              
cases, I'm  happy to try with the  consent of this group  to amend                                                              
this bill and put it in there.                                                                                                  
                                                                                                                                
MR.  YOULD:  I'd  be  happy  to   do  that.  I  did  propose  some                                                              
legislation or  some language  last night and,  as I say,  some of                                                              
the legislators  felt that  it was just  a little bit  too arduous                                                              
and  that's why  they  wanted  us to  come  up with  a  compromise                                                              
language, which is what you have there.                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: Sure and I appreciate  that. If you could do that                                                              
maybe later on as we get that substitute  back here so we've got a                                                              
piece  of paper  in  front of  us  and we  can  all start  talking                                                              
specifically about it.                                                                                                          
                                                                                                                                
SENATOR  THERRIAULT: In  negotiations -  you said  that's not  the                                                              
right term  - would  part of it  just run  out of suggestions  and                                                              
what's the upside and what's the  downside? I do that all the time                                                              
with the  departments, sometimes  as I'm  putting screws  to them.                                                              
Just because  I want  to figure  out -  I think  I know what  this                                                              
does, but  maybe the department comes  back and says,  'Well, have                                                              
you thought it's going to do this,  this, and this?' and I'll say,                                                              
'Oh, I hadn't  thought about that.  You're right on that  one.' So                                                              
was it more of that type of negotiations? How would this work?                                                                  
                                                                                                                                
MR. YOULD:  I would  say yes. I  mean, you  know, frankly  we were                                                              
just trying to figure out a way to  transition these 400 under the                                                              
timelines.                                                                                                                      
                                                                                                                                
SENATOR THERRIAULT: And would it  make sense with the 400, do they                                                              
lend themselves  to anything that's,  you know x number  of months                                                              
old, they get  this accelerated or does it not  work because maybe                                                              
that works  for 10 out of the  15 in that category, but  the other                                                              
five have some  extenuating circumstances that it  doesn't fit and                                                              
fall into  the same thing we  always have with statutes?  One size                                                              
doesn't always fit all.                                                                                                         
                                                                                                                                
MR. YOULD:  Well, I guess  my belief  is the commission  could sit                                                              
down  with  their  entire  caseload   and  they  could  make  some                                                              
subjective  evaluations  about  where  they  should  be  in  their                                                              
timeline evolution. Yes, I think that could be done.                                                                            
                                                                                                                                
CHAIRMAN TAYLOR:  Other questions?  I don't have  anything either,                                                              
Eric.  I  really   appreciate  your  candor  in   answering  these                                                              
questions and  any assistance  you can  give us finding  something                                                              
that will  put a little  more teeth into  that committee  and into                                                              
the  delays that  are  available  to them  on  timelines and  into                                                              
orchestrating a system  that will drive that 400  cases so that we                                                              
won't be facing the same 400 two years from now.                                                                                
                                                                                                                                
MR. YOULD: I appreciate it.                                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR: If  you  could hang  around  and participate  in                                                              
that, we'd really appreciate it. I know your members would too.                                                                 
                                                                                                                                
SENATOR  THERRIAULT:  Mr. Chairman,  I  don't  know if  people  in                                                              
[indisc.] have  hung on to the  teleconference. Could we  just see                                                              
if there's anybody at the LIO in Fairbanks?                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR:  Sure. Is there  anyone at the LIO  in Fairbanks?                                                              
Are you looking for Buki in particular?                                                                                         
                                                                                                                                
SENATOR THERRIAULT: Yes.                                                                                                        
                                                                                                                                
MR. BUKI WRIGHT: Yeah, I'm here.                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR:  This is somewhat  awkward to do, but  believe it                                                              
or not,  judges actually  do this  today, too,  which I've  always                                                              
thought is weird. Buki, would you raise your right hand, please?                                                                
                                                                                                                                
MR. WRIGHT: It's raised.                                                                                                        
                                                                                                                                
CHAIRMAN TAYLOR: Do  you swear the testimony you're  about to give                                                              
is the  truth, the whole  truth and nothing  but the truth  and do                                                              
you so swear and aver?                                                                                                          
                                                                                                                                
MR. WRIGHT: I do.                                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR:  Thank you. Give  us your full name,  please, and                                                              
go forward. I appreciate your patience in standing by.                                                                          
                                                                                                                                
MR. WRIGHT:  I'm Buki  Wright and  I'm general  manager of  Aurora                                                              
Energy. We're,  unlike some  who have  testified earlier,  we're a                                                              
very  small  utility  and  a fairly  new  utility.  We  came  into                                                              
existence when  the City  of Fairbanks decided  to get out  of the                                                              
utility business  and privatized their  utilities and we  have the                                                              
power plant  in downtown Fairbanks  and the district  heat system.                                                              
Both of those are regulated under  separate certificates. With the                                                              
power  side we  sell all  our power  under  wholesale power  sales                                                              
agreements  to  Golden Valley  Electric  Association  and, on  the                                                              
district  heat side,  we sell  hot water  heat and  steam heat  to                                                              
business,  residential  and  local  government  customers  in  the                                                              
downtown  area.  So,  we  have  an interest  in  RCA  and  we  are                                                              
regulated   by  RCA.  I   don't  have   a  written  out   prepared                                                              
presentation for you,  but I've got some notes and  I apologize in                                                              
advance if I ramble. Should I go  through my points or do you want                                                              
to ask  me some questions  or how would  you like to  proceed, Mr.                                                              
Chair?                                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR:  Mr. Wright, please  just go through  your points                                                              
as you feel comfortable doing and  if anybody has a question, I'll                                                              
just call out your attention to it, but no, you go right ahead.                                                                 
                                                                                                                                
MR. WRIGHT:  Okay. First  off, let  me tell you  we have,  I have,                                                              
excuse me,  the work draft of the  House Bill and then  just about                                                              
three  or four  minutes ago  I was  handed, I  think, the  updated                                                              
version  that  you all  had  been  discussing.  When you  get  new                                                              
drafts,  some  things  stay  the  same and  then  there  are  some                                                              
nuances. So,  I may refer  to some features  to the extent  that I                                                              
have  any comments  on  that. I  think in  general  I think  we're                                                              
talking about whether to reauthorize  RCA now or not. And there is                                                              
a point  of view  that says, 'No,  we ought  not to.' and  there's                                                              
another  point of  view  that says,  'Yes,  we  should.' and  then                                                              
questions about  that about  how long. Some  of you who  had said,                                                              
'No, we  shouldn't,' say,  'Well, you're  not shutting  down RCA.'                                                              
But,  it's  sort  of  confusing on  the  language  on  sunset  and                                                              
terminate  and I believe  the statute  that exists  says that  the                                                              
commission does terminate  or I'm not sure what the  word is, June                                                              
30, 2002 and  then I guess that's  the point of the  discussion is                                                              
whether to reauthorize them.                                                                                                    
                                                                                                                                
The understanding  I have is that without a  reauthorization, they                                                              
do terminate, but they sunset and  then they have a period of time                                                              
to get  things in order,  which I understand  is about a  year and                                                              
that would be  theoretically to kind of finish up  the dockets and                                                              
quiet things down.  I know it's been said that,  'Well, that's not                                                              
a  serious  consideration.'  That's not  something  that's  really                                                              
going to  happen, but at least  just mechanically in  the process,                                                              
that's what I've come to understand  is what is supposed to happen                                                              
if this thing actually closed down.                                                                                             
                                                                                                                                
6:00 p.m.                                                                                                                       
                                                                                                                                
SENATOR DONLEY: Hey Buki?                                                                                                       
                                                                                                                                
MR. WRIGHT: Yeah?                                                                                                               
                                                                                                                                
SENATOR DONLEY:  Do you have a  specific request of  the committee                                                              
or a specific  suggestion? We understand  all that, but  we really                                                              
are interested  in what  your specific  thoughts  are and what  we                                                              
should do at this point in time.                                                                                                
                                                                                                                                
MR. WRIGHT:  OK. Well, fine. Thank  you. What my  specific thought                                                              
is you  need to extend  them. We'd like  to see them  extended for                                                              
four years, but  if not that, at least for two  years. Um, I don't                                                              
have  a problem  with a lot  of the  discussion on  some of  these                                                              
issues people have that have to be  addressed, but we would have a                                                              
concern that  if all  of those  issues were  being addressed  in a                                                              
wind-down  year  situation  because of  uncertainties  that  would                                                              
create. I don't  even know what you're talking about  now in terms                                                              
of years  or if  in fact  you've talked  about that,  but I  think                                                              
this, I  don't know what  this bill does,  but I think it  has two                                                              
years.  That  for  me  seems  like  it  ought  to  be  a  minimum,                                                              
particularly  if this advisory  committee were  to be formed.  The                                                              
advisory committee would be formed  and would have about a year to                                                              
look  into  things   and  come  up  with   recommendations.  Those                                                              
recommendations would  be made back to the legislature  or whoever                                                              
and at some point during that time  or after would be passed on to                                                              
the RCA. The RCA would then have to deal with it.                                                                               
                                                                                                                                
So, if you take  a year to kind of formulate what  changes need to                                                              
be made,  RCA needs to  have some time to  act on that.  You would                                                              
want to see  that they in fact  are acting in good faith  to carry                                                              
out what  recommendations had been  made. And then two  years from                                                              
now or four, whatever,  you could look at it and  say, 'Well, okay                                                              
everybody has  been doing what's  recommended or are they  doing a                                                              
good job? Do the utilities feel like  they're being treated fairly                                                              
and these things are being addressed?'  If the answer is yes, then                                                              
reauthorize  them for  a full four-year  term.  If not, then  deal                                                              
with it then.  But we're concerned  - we've had recently  an issue                                                              
before the  RCA and without  boring you with  it, we feel  like we                                                              
were  treated basically  fairly. We  have a  petition before  them                                                              
now.  It's  important that  it  will  get  addressed in  a  timely                                                              
manner. It's also  important that whoever addresses  it understand                                                              
what they're  addressing and can  deal with things  expeditiously.                                                              
We're comfortable that if whoever  of the five individuals who are                                                              
now commissioners  get to sign to  it, we feel like that  we'll be                                                              
dealt with competently  and fairly and we'd like  to be dealt with                                                              
in a timely  manner and would like  for them not to  be distracted                                                              
by that.                                                                                                                        
                                                                                                                                
So, basically, our  concerns are that they be  reauthorized - that                                                              
that be for at  least a two-year period of time.  We like the idea                                                              
of this  oversight committee.  We like the  idea of the  timelines                                                              
that have been put on the different  types of procedures that they                                                              
do. I particularly like, if it's  still in there, in the oversight                                                              
committee, that they  set the timing for the timelines  up now and                                                              
then  this  committee  looks at  it  to  see  if these  times  are                                                              
reasonable. If  something's been set  at 15 months, and  it really                                                              
ought to  be at  12 months or  vice versa, I  think that's  a good                                                              
chance to have  a second look at that and make  recommendations if                                                              
those things  need to  be changed.  I don't think  that has  to be                                                              
fixed exactly perfectly right now.                                                                                              
                                                                                                                                
The only other  - I do have  one concern about the House  bill and                                                              
it's a minor  concern, but it's a provision for  monthly meetings.                                                              
I  like the  idea of  meetings, but  you've got  to put  a lot  of                                                              
additional workload  on a group that's already got  a big workload                                                              
and they have to have monthly meetings  to deal with a lot of this                                                              
advisory committee  is apparently going to be  dealing with anyway                                                              
seems like  a distraction to me. If  it seems like a  good idea to                                                              
do those meetings,  maybe do them, but maybe consider  a different                                                              
frequency like quarterly or every  six months. Monthly seems to be                                                              
a  pretty  onerous requirement,  particularly  when  this  doesn't                                                              
appear here to be any requirement  of what is supposed to come out                                                              
of the  meetings. If something  is discussed,  does it have  to be                                                              
dealt with? Can  it be dealt with? Or whatever. I  don't know that                                                              
that's  a  productive exercise  but,  otherwise,  we're  generally                                                              
pretty happy with the bill as I see  it here and would urge you to                                                              
extend them and  let's fix this thing going forward  in a timeline                                                              
that makes some sense.                                                                                                          
                                                                                                                                
I'll shut  up now.  I know it's  late, but those  are the  kind of                                                              
things that are on our minds yet.                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR:  Well, Buki,  we appreciate  you standing  by and                                                              
having the  patience to wait for  this committee today and  I just                                                              
had  a  couple of  questions  for  you.  Do  you have  a  petition                                                              
currently pending before the RCA you said?                                                                                      
                                                                                                                                
MR. WRIGHT: Yes.                                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR: What's that a petition for?                                                                                    
                                                                                                                                
MR. WRIGHT: It has to do with the  wholesale power contract on the                                                              
electric side of our business and  it was just filed. So, it's not                                                              
anything  that's been there  for a  long time.  It was just  filed                                                              
probably a couple of weeks ago. I don't remember the exact date.                                                                
                                                                                                                                
CHAIRMAN TAYLOR:  Is this  a request for  an increase in  the rate                                                              
that you can wholesale power at?                                                                                                
                                                                                                                                
MR. WRIGHT: Yes, it is.                                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR: And  will this have a significant  impact on your                                                              
business?                                                                                                                       
                                                                                                                                
MR. WRIGHT:  Yes, it will  have a very  significant impact  on our                                                              
business.                                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: Because I was just  up there the other day and it                                                              
didn't look  like your plant  was operating.  I mean I  guess that                                                              
you're  making some  steam, but I  don't [know]  if you're  making                                                              
electricity or not right now.                                                                                                   
                                                                                                                                
MR. WRIGHT: Oh yeah, we're operating.  We had a very small part of                                                              
the plant  has been  down for  some scheduled  maintenance,  but I                                                              
know the plant is operating and right now is running all out.                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Okay, who was it  informed you that your petition                                                              
might not  get addressed  in a timely  fashion if this  commission                                                              
was not extended?                                                                                                               
                                                                                                                                
MR. WRIGHT: Actually, Senator Taylor,  no one has said that to us.                                                              
I guess  I've come to  that potential on  my own, because  it just                                                              
seems to me that if you don't act,  if the legislature doesn't act                                                              
and therefore they sunset and they  begin a wind-down year Monday,                                                              
a week from yesterday,  and that means they have  a docket load of                                                              
400 some petitions or issues or cases  or whatever and they've got                                                              
to do something  with those and then  they have to, I  guess, look                                                              
at all of  these things that we're  talking about that  need to be                                                              
fixed in  order for you to  actually allow them to  continue after                                                              
this wind-down  period and then,  in addition to that,  there were                                                              
recommendations  from  the legislative  audit  group that  they're                                                              
dealing with  too, but don't seem  to be terribly major,  but they                                                              
still have to do them and then, finally,  there would be something                                                              
that they'd  have to look at  as potential for  wind-down, because                                                              
they  wouldn't  know  if  in  fact they  truly  are  going  to  be                                                              
extended.  For  example,  you  guys may  decide  that  instead  of                                                              
extending them  under some  conditions, you're  going to  create a                                                              
separate regulatory agency and let  this one die. If that happens,                                                              
this  group  has   to  do  something.  So,  I've   come  to  those                                                              
conclusions  on my own.  I've not  talked to  anyone at  RCA about                                                              
that. I've  not talked  to anyone  at RCA period.  I just  kind of                                                              
came to those conclusions.                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR: Okay.  I just want to assure you  that if nothing                                                              
were to be done right now, there  would be nothing that they would                                                              
have to do about  the audit that was done. There  would be nothing                                                              
that they would  have to do as far as meeting  with the committee.                                                              
There would be nothing that they  would have to do different about                                                              
the 400  cases that  have been languishing  there for  years right                                                              
now. Nothing would change and I don't  know where that speculation                                                              
may have  come from, but  we have not  had any indication  of that                                                              
except  for the  commission itself,  which has  portrayed this  as                                                              
some difficulty  that may be encountered  in the future.  There is                                                              
no historic  basis for  it from  the same  thing that occurred  in                                                              
1994, but I  thank you very much  for your testimony and  if there                                                              
are other questions? [NONE WERE INDICATED] Senator Donley?                                                                      
                                                                                                                                
SENATOR DONLEY: Do we have a proposed committee substitute?                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: It  should be here in another 15  - 20 minutes or                                                              
so. They said about an hour and a  half when I talked to them. Jim                                                              
Duncan, Department of Administration,  had made himself available.                                                              
I  had  told  him  that  I  didn't  know  that  anybody  was  real                                                              
interested. If somebody  would like Jim to come over,  we can give                                                              
him a  call. He was  only wanting to  talk about the  contract and                                                              
the  RFP and  the  $300,000  study. I  think  the only  person  we                                                              
haven't heard  from again was  Jim Rowe -  and Marie Darlin  is no                                                              
longer here. Yeah. She's already gone.                                                                                          
                                                                                                                                
SENATOR ELLIS:  Mr. Chairman, could  I inquire, what is  your work                                                              
plan for the evening?                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: I wanted to give  the commissioner an opportunity                                                              
to respond to some of this.                                                                                                     
                                                                                                                                
SENATOR DONLEY: Jim, are you going  to say anything different than                                                              
what we heard last week?                                                                                                        
                                                                                                                                
MR. JIM  ROWE: I  will be very  brief if  I have the  opportunity,                                                              
Senator.                                                                                                                        
                                                                                                                                
SENATOR  ELLIS: The  plan is two  more witnesses  and then  you're                                                              
going  into  caucus  and  then  we're  coming  back  here  as  the                                                              
Judiciary Committee after that?                                                                                                 
                                                                                                                                
CHAIRMAN  TAYLOR:  Yes.  It's  my  intent  to  get  some  kind  of                                                              
committee  substitute put  together this  evening. That's  my only                                                              
plan, John, and I don't know how else to do it other than that.                                                                 
                                                                                                                                
SENATOR ELLIS: Is it going to be an all nighter?                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: I hope  not. Let's  see how  quickly we  can get                                                              
done with this stuff  and get on with it. I remind  you, Mr. Rowe,                                                              
that you're still under oath and please proceed.                                                                                
                                                                                                                                
MR. ROWE:  Thank you Mr.  Chairman, and  thank you members  of the                                                              
committee,  and let  me say I've  had the  opportunity to  testify                                                              
before a few  legislative committees before and this  is the first                                                              
time I've had  the opportunity to  be under oath and I  think it's                                                              
an excellent  reinforcement of the  veracity of our  comments that                                                              
must come  before the  committee in  trying to  be as accurate  as                                                              
possible and  for you to know  that we're being as  forthcoming as                                                              
possible.   The  ATA   is  on  record   as  being   in  favor   of                                                              
reauthorization for four years. I  have seen the House bill. It is                                                              
acceptable to  us. It  has a two-year  reauthorization date.  I am                                                              
going  to  point out  a  couple  of the  differences  between  the                                                              
electrics'  testimony  you've  heard  today  and  why  we  in  the                                                              
telephone  business  feel  like reauthorization  is  perhaps  more                                                              
important.  I've mentioned  to  you before  that  the $75  million                                                              
annually through USF - I'll not belabor  that. Please remember it.                                                              
                                                                                                                                
Chugach spoke  this morning about  it once, really,  from economic                                                              
regulation  and  they  encouraged  you  not  to  reauthorize  this                                                              
commission,  well, for one  reason -  until you  do so some  work.                                                              
Well,  they'd like  to have  perhaps  reauthorization with  relief                                                              
from economic  regulation. Being  a co-op,  of course,  they could                                                              
get  that  through  the  state process  right  now.  Some  of  our                                                              
telephone   co-ops  have   done  that.   They've  gone  to   their                                                              
membership,  had   an  election   and  no  longer   have  economic                                                              
regulation. One very recently went  to its membership, took a vote                                                              
and they  did not get relief  from economic regulation.  The co-op                                                              
member  owners   decided  that.  Chugach  has   that  opportunity.                                                              
However, in  pushing this opportunity  for reauthorization  to the                                                              
brink, and Chugach knowing they'd  be happy to get out of economic                                                              
regulation and if  indeed it doesn't work and it  dies and it goes                                                              
away, though it probably wouldn't  happen, what's the risk? They'd                                                              
be out  of economic regulation.  It doesn't  seem to me  that they                                                              
have a great opportunity to lose  there. So, I just point that out                                                              
to you.                                                                                                                         
                                                                                                                                
I'd like  to address  a little  bit the  comments from Mr.  Carson                                                              
this morning  only as  it addressed  the rural  issues. ATA  is in                                                              
essential  agreement with  them on  the issues  he brought  before                                                              
you.  I'd say  100  percent except,  in  all honesty,  we'll  find                                                              
something  somewhere  we  disagree  on,  but  we're  in  essential                                                              
agreement on  those rural issues.  ACS's position is  supported by                                                              
ATA regarding  the lifting  of the  rural exemptions. We  disagree                                                              
with the decision that was rendered  by the RCA. However, there is                                                              
a  process in  the  State  of Alaska  and  the United  States  for                                                              
appealing decisions  from administrative agencies and  that is the                                                              
judicial process and  it's going through that  process. It's being                                                              
used as  our system  of government  and courts  and laws  have put                                                              
forward. This is  what we do and that's being used.  It's going up                                                              
to the Supreme  Court now. Tedious? Expensive?  Absolutely! That's                                                              
our system of government.                                                                                                       
                                                                                                                                
I'll say  yes, there's a  bias. We have  people on  the commission                                                              
who are  biased in believing that  competition works in  a natural                                                              
monopoly that  comes from the  federal legislation. They  might be                                                              
biased  in  believing that  the  competition  will work  in  rural                                                              
areas. I disagree.  However, the reason some of  these things went                                                              
        th                                                                                                                      
to the 8  Circuit is nationally we  have a whole lot of people who                                                              
are not real sure where the burden  of proof is supposed to be. It                                                              
                             th                                                                                                 
wouldn't  have gone to  the 8   Circuit if  the issue hadn't  been                                                              
raised  in a  number of  circuits  and brought  together and  gone                                                              
there. So, it's  not a real cut and dried decision.  The bias that                                                              
I point out is  in their belief, not at all in  any bias they have                                                              
toward or  against any  member of  industry. We have  professional                                                              
commissioners; they work hard. That's  not always been the case in                                                              
the past,  even in  my short  tenure in  Alaska. They have  higher                                                              
integrity; they have my respect.                                                                                                
                                                                                                                                
You've heard  comments regarding urgency.  Some issues need  to be                                                              
addressed because  of their  urgency and  you've heard  that today                                                              
and I absolutely agree. There is  urgency in these issues. I think                                                              
there was  urgency in  these issues  in January.  I've heard  none                                                              
mention  differently that  weren't  equally urgent  in January  or                                                              
February or when  the House was considering legislation.  With all                                                              
due respect,  Mr. Chairman, earlier  today you offered  a question                                                              
to  one of  the  members of  industry  giving  testimony and  that                                                              
question  was, 'Why are  we here?'  And I'll  tell you we're  here                                                              
because  the  Alaska  State  Senate  failed in  its  duty  to  the                                                              
citizens of  Alaska in addressing  this issue when it  should have                                                              
been addressed in regular legislative session.                                                                                  
                                                                                                                                
SENATOR COWDERY: That's your opinion. That's not my opinion.                                                                    
                                                                                                                                
MR. ROWE:  With all  due respect,  Senator, under  oath, it  is my                                                              
opinion,  yes. I  do  thank you  for allowing  me  to bring  those                                                              
comments  and  with  all  regards to  intimidation,  I  feel  very                                                              
comfortable in the  group I'm in. Thank you for this  forum. Can I                                                              
answer any questions?                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: I've got a couple.  Let's just start off with the                                                              
bias towards  competition. What size  of utility are  you involved                                                              
in, Jim?                                                                                                                        
                                                                                                                                
MR. ROWE:  The companies that I  represent, and we're  a nonprofit                                                              
trade   association,  the   Alaska   Telephone  Association,   the                                                              
companies are  all rural telephone  companies and  incumbent local                                                              
exchange  carriers from  serving 100 customers  to serving  60,000                                                              
customers. I don't know the exact number.                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: Do  you  believe what  the  commission ruled  in                                                              
competition?                                                                                                                    
                                                                                                                                
MR. ROWE: I believe  my testimony will say I  disagreed [with] the                                                              
decision they have rendered regarding  competition in rural areas,                                                              
Mr. Chairman.                                                                                                                   
                                                                                                                                
CHAIRMAN  TAYLOR: And  by  that,  do you  mean  their decision  on                                                              
Juneau  and their decision  on North  Pole and  their decision  on                                                              
Fairbanks?                                                                                                                      
                                                                                                                                
MR. ROWE:  I disagree with those decisions.                                                                                     
                                                                                                                                
CHAIRMAN TAYLOR: Why?                                                                                                           
                                                                                                                                
MR.  ROWE: Because  I don't  believe  in a  natural monopoly  that                                                              
building  dual  facilities  or  letting   somebody  else  use  the                                                              
infrastructure,  first  of  all, using  the  same  infrastructure,                                                              
doesn't  bring   competition.  It   allows  two  people   to  sell                                                              
something,  which belongs to  one of  the entities. Even  building                                                              
dual facilities  in this  business we only  get sources  of income                                                              
from customers. We  all pay it. I don't believe we  can build dual                                                              
facilities knowing that the same  number of customers are going to                                                              
be paying  for those  facilities. I don't  find any cost  savings.                                                              
There  is a  cost  to  those. Now  if  one goes  into  bankruptcy,                                                              
perhaps, and  those facilities are  bought for less than  the cost                                                              
of putting  them there, certainly  the rates can be  lowered based                                                              
on the cost of  procurement of the infrastructure,  but not on the                                                              
cost of having  provided the infrastructure initially.  I don't  -                                                              
this  is  as I  say  a  natural  monopoly.  I don't  believe  that                                                              
Congress did  the citizens  of this country  a favor in  making an                                                              
allegedly  pro-competitive  environment   for  telecommunications.                                                              
About  a  month  ago,  a  much  revered   senator,  Senator  Diane                                                              
Feinstein, before  the Senate said,  'What we really need  is more                                                              
money to regulate deregulation.'                                                                                                
                                                                                                                                
Now as  Eric told you  a little  while ago, telecommunications  is                                                              
having  an  awful  time  with  a  supposedly  what  was  touted  a                                                              
deregulatory  bill, but  it's not  been deregulatory  at the  FCC.                                                              
Certainly it's  being dealt  with in  Congress. Our commission  is                                                              
far  more  swamped  with telecommunications  issues  than  it  was                                                              
before this bill.                                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR: Have you been privy  to any of these negotiations                                                              
or discussions that we've heard talked about?                                                                                   
                                                                                                                                
MR. ROWE:  If you're  talking about  - and I  can assume  the ones                                                              
you're talking about with Mr. Yould and Mr. Jackson?                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR:  Actually,  I  kind  of  meant  Mr.  Yould,  Mr.                                                              
Jackson, Mr. Mulder, Mr. Denny DeWitt,  the commissioner, herself,                                                              
participating and talking with people  in the utilities about what                                                              
she would agree to or not agree to.  Have you been involved in any                                                              
of that?                                                                                                                        
                                                                                                                                
MR.  ROWE: Mr.  Chairman,  let me  back up  then.  In the  earlier                                                              
communications  regarding  the  timelines,  Eric Yould  did  share                                                              
those with  me. When he was  discussing them with  Chair Thompson,                                                              
Representative Mulder  or his staff  back in, perhaps,  April, and                                                              
did  get them,  I think,  electronically from  Eric. We  certainly                                                              
discussed them on the telephone.                                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR:   Did  you  take  the  time   to  electronically                                                              
communicate with the commissioner yourself on any of those?                                                                     
                                                                                                                                
MR. ROWE: I don't think I did, no.                                                                                              
                                                                                                                                
CHAIRMAN TAYLOR:  This rural exemption  - you wouldn't  appreciate                                                              
it if we just took care of that in  this bill, would you? And just                                                              
removed it? That way we can provide competition for everybody.                                                                  
                                                                                                                                
MR.  ROWE:  Mr.  Chairman,  if you  believe  that's  serving  your                                                              
public, I wish you well with it.                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR:  I agree  and I think  you don't either.  I think                                                              
some of these  decisions have been  egregious and they need  to be                                                              
responded to  and I don't  think we respond  to it by  burying our                                                              
head in the sand.                                                                                                               
                                                                                                                                
MR. ROWE:  Mr. Chairman, I  absolutely agree. We're  fighting them                                                              
on a national and federal level.                                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR: Further  questions? Thank  you, Jim,  appreciate                                                              
it.                                                                                                                             
                                                                                                                                
MR. ROWE:  Thank you  very much,  sir, for  your patience  and the                                                              
committees'.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR: Your  candor, too. I always appreciate  that. The                                                              
LIO needs to  know if there's anyone else anticipating  to testify                                                              
on the teleconference  line. I was not aware of  anyone other than                                                              
Mr. Wright  in Fairbanks. Do any  of you have anybody  standing by                                                              
some place else?                                                                                                                
                                                                                                                                
Okay,  there was  one  other witness  wishing  to testify,  Kristi                                                              
Catlin. Kristi? I'd just remind you  that you're still under oath.                                                              
Go ahead and proceed.                                                                                                           
                                                                                                                                
MS. KRISTI  CATLIN:   AT&T Alascom  has reviewed  the language  in                                                              
CSHB 3001  and, with slight  modification, would support  it. That                                                              
modification  would  be  an  addition  of an  IXC  member  to  the                                                              
advisory committee.                                                                                                             
                                                                                                                                
SENATOR DONLEY: I don't know what that means.                                                                                   
                                                                                                                                
MS.  CATLIN:  I'm sorry.  Excuse  me,  I'm getting  into  industry                                                              
language.  It  means  interexchange  carrier or  a  long  distance                                                              
carrier.  It's important  to understand  that just telephone  does                                                              
not mean  that if  you share the  industry of  telecommunications,                                                              
you may not share  interests. So, what a local  company might find                                                              
in its  best interest,  and an  interexchange  or a long  distance                                                              
carrier might not - for a competitive  local company as opposed to                                                              
the  incumbent carrier.  So, on  the  existing proposed  committee                                                              
there  is  a  competitive  LEC (local  exchange  carrier)  and  an                                                              
incumbent LEC, but the interexchange  carrier is missing and since                                                              
interexchange carriers  connect every  community in this  state, I                                                              
believe it's very important membership  to have on that committee.                                                              
So, with  that, we just would  like to support the  House language                                                              
and I'd be happy to accept any questions.                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: Just  one. Does  AT&T really  believe that  this                                                              
committee is  anything other  than some  goofy window dressing  to                                                              
tag on to this  thing to get a two-year extension?  I mean, do you                                                              
really honestly believe something  meaningful is going to come out                                                              
of this kind  of group grope  we're putting together with  a bunch                                                              
of tokenism of  every single entity in the telephone  industry has                                                              
to be part of it and once we get  them all together and they start                                                              
humming  kumbaya, that  something  is going  to come  out of  this                                                              
thing? Do you guys really believe this stuff?                                                                                   
                                                                                                                                
MS. CATLIN: We would hope so.                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR:  I would hope so,  too. I really believe  that we                                                              
would all hope so.                                                                                                              
                                                                                                                                
MS. CATLIN:  What I believe, Senator,  is that having  an industry                                                              
group would  keep it  from being  political. We  would be  able to                                                              
voice our concerns. I wouldn't have  supported without it being in                                                              
the bill. I think that yes, we can make some good suggestions.                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: Some  have made the comment that  having industry                                                              
members  and they're  too  closely  affiliated with  what  they're                                                              
trying  to advise on  regulation  and that we  should have  third-                                                              
party and  more objective people  involved, maybe a panel  of some                                                              
kind  of experts  or whatever.  What do  you think  about that  as                                                              
opposed to  having the  industry? Because I  think that's  part of                                                              
the reason  you want to  have your representative  on there  is to                                                              
make sure your area is protected  as against the others who may be                                                              
there.                                                                                                                          
                                                                                                                                
MS. CATLIN: I believe that we would  have the most information and                                                              
the most  knowledge about  the issues. So,  I do believe  that the                                                              
industry would be the best forum for the advisory committee.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  But doesn't  the industry  end up conflicted  in                                                              
itself in that process  when they end up with every  member of the                                                              
industry having  something currently  pending at that  time before                                                              
the RCA when  they sit down with  their meetings? Are we  going to                                                              
go with  the reward side  of the ledger? Are  we going to  go with                                                              
the retribution  side of  the ledger? Are  we going to  be upfront                                                              
and honest with  our colleagues and try to make changes  or are we                                                              
going to suck  up to the commissioners in the  meeting this month?                                                              
I can see that changing from month  to month as people's petitions                                                              
and applications come up for decisions.                                                                                         
                                                                                                                                
MS. CATLIN:  It would be difficult  with the size of  the advisory                                                              
committee  that is proposed  to have  that much  influence  if you                                                              
have a docket before the commission.  I would view what would come                                                              
out  of  this committee  to  be  policy  oriented and  to  improve                                                              
procedures for the commission. So,  I don't think it would come to                                                              
the substance of the dockets.                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Does Mike Widman still work with you guys?                                                                     
                                                                                                                                
MS. CATLIN: Yes, he does.                                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: Tell him hi for  me. Kristi, thank you very much.                                                              
I wanted  to give the  commissioner an  opportunity to  respond or                                                              
the commission members, however you wish to do that.                                                                            
                                                                                                                                
Madam  Chairman,  Commissioner, I  remind  you you're  both  still                                                              
under oath and give you the floor.                                                                                              
                                                                                                                                
CHAIRWOMAN THOMPSON:  Thank you, Mr.  Chairman, the hour  is late,                                                              
gentlemen  and I  want to  be responsive  and I  have been  making                                                              
notes through the course of this  hearing about some questions you                                                              
have. I  imagine you're  also interested  in our  comments  on the                                                              
bill and I  want to use the  time most efficiently. So,  what I've                                                              
got planned  unless you tell me,  and this is your shot,  you want                                                              
otherwise  is to  just go  through  some of  those questions  very                                                              
briefly  as well  as  offer comments  on the  bill  and then  make                                                              
myself available for questions. Is that okay?                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Go right ahead. That sounds good.                                                                              
                                                                                                                                
CHAIRWOMAN THOMPSON: Okay. I first  want to update my testimony to                                                              
this committee from  when I was here before. One  of the issues we                                                              
discussed  was the  commission's appeal  record, that  is how  our                                                              
decisions  were  upheld or  not  and  there was  another  decision                                                              
issued by  the Alaska Supreme Court  last Friday. I don't  know if                                                              
you've had a copy made available to the entire committee?                                                                       
                                                                                                                                
CHAIRMAN TAYLOR: Yes.                                                                                                           
                                                                                                                                
CHAIRWOMAN THOMPSON:  I see headshakes.  The next issue I  want to                                                              
address  was  the question  raised  by  Senator Donley  about  ETC                                                              
status.  ETC is  eligible  telecommunications  carrier. There  was                                                              
some testimony  offered by  ACS about that  being a new  issue and                                                              
they wouldn't have had any reason  to know, but what I said wasn't                                                              
entirely  accurate. There  is  an ETC  application  by a  wireless                                                              
carrier in the  State of Alaska. That docket is  open and pending.                                                              
There is a number of interveners.  It's in Southeast. It's in your                                                              
part of the state, Senator. We haven't  made a decision on that so                                                              
I can't comment  on the facts  of that particular docket,  but you                                                              
should  be aware  that many  other  states have  ruled on  similar                                                              
applications.  Washington granted ETC  status to several  wireless                                                              
carriers.  The  State of  South  Dakota  denied  it and  that  was                                                              
appealed  and they  were eventually  reversed. So,  we're not  the                                                              
first state to deal with this issue.  It's been addressed in other                                                              
states. This particular case we have  pending before us now is the                                                              
first time  the issue  has been raised  here. The significance  of                                                              
ETC status  is tied  to universal  service support. Under  federal                                                              
law, a  carrier, any telecommunications  carrier, is  not eligible                                                              
to get universal  service support unless they're  certified by the                                                              
state commission  as an ETC. This  is one of the  responsibilities                                                              
that  state commissions  are  given under  the  Telecommunications                                                              
Act. We  have a list  of services designated  by the FCC.  I think                                                              
there's  nine things  on the  list now.  It's like  access to  911                                                              
service, local  voice telephony. We  have to look at  that carrier                                                              
and  certify  that  they're  capable   of  providing  those  basic                                                              
services before they can be designated  as an ETC and we also make                                                              
a public interest finding. Universal  service support is basically                                                              
designed  to  allow  all  America's   people  to  communicate  and                                                              
granting  the  ETC status  would  put  whoever  is applying  in  a                                                              
position to be able to be eligible  for that funding and there was                                                              
some discussion about  what happens when a competitive  carrier is                                                              
certified as  an ETC. The testimony  on that was  almost complete.                                                              
If they are certified  as an ETC, they are eligible  to receive an                                                              
amount and it's  an amount that's not set on  historical cost. The                                                              
competitive  carrier gets  the same  amount as  the incumbent  was                                                              
getting except what  a competitive carrier is  eligible to receive                                                              
is capped at  the UNE rate. So,  in other words, if  a competitive                                                              
carrier is  paying an ILEC  $10 for a  loop and the  incumbent was                                                              
getting $15 for that loop under the  universal service program, if                                                              
the  competitive carrier  is certified  as  a CLEC  and gets  back                                                              
customers, what would  happen is that $5 of that  support would go                                                              
to the incumbent  and the $10, the  same amount the CLEC  pays for                                                              
the loop to the incumbent is what they would receive.                                                                           
                                                                                                                                
SENATOR DONLEY: Why?                                                                                                            
                                                                                                                                
CHAIRWOMAN THOMPSON:  Why? Because  the program  is set up  to not                                                              
compensate the  CLEC any more than  they would be paying  for that                                                              
loop recognizing that there's additional cost.                                                                                  
                                                                                                                                
SENATOR DONLEY: I  mean why should they get anything?  They're not                                                              
the primary  coverer. They're not  the one that's out  running the                                                              
lines to rural areas. Why would you want to give them anything?                                                                 
                                                                                                                                
CHAIRWOMAN  THOMPSON:  Because they're  providing  service to  the                                                              
customer  and they're  incurring costs  to do  it. From the  FCC's                                                              
perspective, they've  either incurred costs by paying  to rent the                                                              
loop or by putting in the equipment.  The distinction with capping                                                              
is to insure that  they don't recover more than they  would have -                                                              
more than the cost that they're incurring.                                                                                      
                                                                                                                                
SENATOR DONLEY: That's beyond common  sense. What I don't think is                                                              
common  sense is  if they  get subsidized  when  they are  already                                                              
given  a subsidized  rate  for  the  loop. They're  already  below                                                              
market value for  the loop and they - you're paying  for the below                                                              
market value.                                                                                                                   
                                                                                                                                
CHAIRWOMAN THOMPSON: The market value...                                                                                        
                                                                                                                                
SENATOR DONLEY: That just seems ridiculous.  Why anyone would want                                                              
to go  into the telephone  business anywhere  in a rural  place in                                                              
America  if that's  the  process  they're going  to  use. It  just                                                              
doesn't make any sense.                                                                                                         
                                                                                                                                
CHAIRWOMAN THOMPSON:  These are  not rules that  we set  that have                                                              
been  set on  a federal  level and  there's a  lot of  folks on  a                                                              
national level  who have been  very critical for  similar reasons.                                                              
The one  distinction  you're arguing  goes to  the next point  I'm                                                              
going to  make. It's  not market rates;  it's this TELRIC  pricing                                                              
that we've been talking about as  the standard and there was a lot                                                              
of discussion about  that in the testimony, too,  I've brought for                                                              
                     th                                                                                                         
the committee. The  8  Circuit decision that's  been discussed was                                                              
appealed to the  Supreme Court and the decision was  issued in the                                                              
middle of May. I've got a copy of it here.                                                                                      
                                                                                                                                
SENATOR DONLEY: I  don't want to go beyond this  point. Let's back                                                              
up.                                                                                                                             
                                                                                                                                
CHAIRWOMAN THOMPSON: Okay.                                                                                                      
                                                                                                                                
SENATOR DONLEY: You know, it's always  - I keep hearing, 'Oh, this                                                              
is the federal rule.  This is the federal rule, but  I don't think                                                              
that's  always  exactly  accurate.  Federal seems  to  be  federal                                                              
guidelines and  then there's a lot  of options for states  to work                                                              
within those  guidelines. Option  number one was  what do  you set                                                              
for the labor rates in your model.  I'm interested in - there were                                                              
a  lot of  things you  had discretion  on  and you  said it's  the                                                              
federal rules.  No, it's not the  federal rules. It is  a decision                                                              
of the local  RCA about how you  wanted to adjust that  model. You                                                              
had a range you  could work with. So, that' not  always the excuse                                                              
every time. It's  the federal rules. Because some  court upheld it                                                              
is not  a good  excuse either,  because that  doesn't make  it the                                                              
best public  policy for  the state, because  the court is  under a                                                              
very ... [END OF TAPE]                                                                                                          
                                                                                                                                
TAPE 02-48, SIDE B                                                                                                            
6:45 p.m.                                                                                                                       
                                                                                                                                
SENATOR DONLEY:  ...was there  evidence to  justify it,  you know?                                                              
Was  their substantial  evidence  to justify  it?  So, that's  not                                                              
persuasive  to me either.  I really  want to  know, are  people in                                                              
Alaska going to  get telephone service? And is  this system that's                                                              
developed and your  model destructive to the future  of this state                                                              
for common  people  to be able  to get  a phone?  That's what  I'm                                                              
concerned  about.  Not  whether  the court  sustained  it  or  not                                                              
whether this  is allowable under  the federal government,  because                                                              
that just doesn't  make any sense, the way you  would approve that                                                              
reimbursement   for  something   that's   already  essentially   a                                                              
subsidized  rate. So,  don't just  answer my  question by  saying,                                                              
'Oh, this  is allowed.' I want  to understand why it  makes common                                                              
sense to anybody.                                                                                                               
                                                                                                                                
CHAIRWOMAN THOMPSON:  I have the  same concerns that you  do about                                                              
service and reliable  service and what kind of  carriers are going                                                              
to be able to provide that long-term  and customers in rural areas                                                              
getting  the  benefit  of  advances in  technology  and  the  same                                                              
quality  of services  that  are available  to  consumers in  urban                                                              
areas.  As  an  administrative  agency,  like  any  administrative                                                              
agency, I don't  have a choice but to follow the  law and that was                                                              
one  of the  things  Commissioner  Furchtgott-Roth  talked to  you                                                              
about is the standard you should  use to judge us by and he called                                                              
it administrative  liberty.  What he's  saying is  do you have  an                                                              
administrative  agency  that  has run  amuck  or  do you  have  an                                                              
administrative  agency that's  following the  law and  I think  he                                                              
told  you that  one of  the ways  you could  find out  if we  were                                                              
following the  law was to look at  our record on appeals.  So, I'm                                                              
trying  to cite  that to let  you know  that at  least what  we've                                                              
tried to do  is do what we feel  - there are some things  in terms                                                              
of setting  UNE prices  that are  left to  our discretion,  but we                                                              
don't have  any choice about  the fact that  we have to  set them.                                                              
That's what the Telecommunications Act says.                                                                                    
                                                                                                                                
What this case says is that the methodology  we're supposed to use                                                              
to set it and it provides that what  this decision addressed and I                                                              
know you've  got a million things  to do, but it might  be helpful                                                              
in terms  of understanding this issue,  because it's a  good basic                                                              
analysis of what UNE rates are and  why it's our obligation to set                                                              
rates that  compensate the incumbent  on a forward-looking  basis,                                                              
not  based  on  the  imbedded  costs   of  the  incumbent.  That's                                                              
specifically the argument that they  set aside. What they heard in                                                              
this case,  and the  court again  dismissed it,  was the  argument                                                              
that you just  articulated that, 'Well, gee, that's  going to mean                                                              
that no incumbent is ever going to  invest anything and no CLEC is                                                              
going to invest anything, because  they're going to be able to get                                                              
this  loop rate  cheap.' The  court specifically  said that's  not                                                              
true. That's  not what  the record  shows. What  our record  shows                                                              
here is that there's been a significant  amount of investment from                                                              
CLECs all  over the  country and  that ILECs  have improved  their                                                              
networks  in order to  be able  to more  effectively compete.  So,                                                              
many of  the arguments  that you're  wrestling  with are the  same                                                              
ones that  have been  debated in  the telecommunications  industry                                                              
for years  and were culminated in  this decision, which  just came                                                              
out about a month ago.                                                                                                          
                                                                                                                                
CHAIRMAN TAYLOR:  We were  just talking about  - many of  you have                                                              
seen investment and  you have seen these things  have happened and                                                              
you're  talking about  across the  country.  You're talking  about                                                              
your discussions with your friends  back there at FERC; you're not                                                              
talking about Alaska.                                                                                                           
                                                                                                                                
CHAIRWOMAN THOMPSON: Yes I am.                                                                                                  
                                                                                                                                
CHAIRMAN  TAYLOR: Where's  the investment  other  than GCI  buying                                                              
some fancy switch  here so they can piggyback on  ACS. Where's the                                                              
investment?                                                                                                                     
                                                                                                                                
CHAIRWOMAN  THOMPSON: ACS  has made  a  significant investment  in                                                              
recent years to build a packet switch  network to serve a contract                                                              
that they were awarded with the State  of Alaska. I don't remember                                                              
the amount of  the contract, but if there's a  representative from                                                              
the ACS here they can tell us.                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR:  That contract reimbursed  them for  their costs;                                                              
that contract is not dependent upon your formulas.                                                                              
                                                                                                                                
CHAIRWOMAN THOMPSON:  I don't know what the terms  of the contract                                                              
are for  the reimbursement,  but that's  a significant  investment                                                              
and  they've  used that  investment  to  offer services  to  other                                                              
customers. They had on their website  that they've cut a deal with                                                              
Williams  to  offer  them  packet switch  technology.  This  is  a                                                              
technology that  doesn't use the  traditional telephony  lines. It                                                              
carries voice  traffic over the  Internet. It's a  new technology;                                                              
it's an advancement  and I think it's great that  ACS is making an                                                              
investment   in  this   type  of   system.   It  has   significant                                                              
implications  for the way  carriers compensate  each other  access                                                              
charges within  the state,  but I think  it's generally  good that                                                              
they're making  an investment to  improve the network  and improve                                                              
their ability to offer quality services to others.                                                                              
                                                                                                                                
CHAIRMAN  TAYLOR: They're  not making that  investment based  upon                                                              
any of  the formulas  or pass-throughs  that you're talking  about                                                              
from the federal government. They  made that investment based upon                                                              
a contract  that you don't even know  the terms of with  the state                                                              
of  Alaska.  It may  have  been  a very  lucrative  contract  that                                                              
allowed them  to go and buy some  good stuff and now  they can use                                                              
it some  place else  in their business,  but it certainly  doesn't                                                              
have a  thing to do with  these other definitions  you're debating                                                              
with Senator Donley.                                                                                                            
                                                                                                                                
CHAIRWOMAN THOMPSON:  There services  they're offering  under that                                                              
wouldn't,  in  many  cases,  be  eligible  for  universal  service                                                              
funding  because of where  they're offered.  There's no  universal                                                              
service funding  available in Anchorage,  for example,  and that's                                                              
about half the markets in the state.                                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR: Let  me just  back up.  What you  said was  that                                                              
because of  - and you're  referring to  the Supreme Court  opinion                                                              
and referring to  these different pseudonyms you've  got for these                                                              
agencies  and so  on  - you  said  that investment  was  occurring                                                              
across the country and when I asked  you where was this investment                                                              
occurring in  Alaska, 'Well,  ACS, because  they got a  contract.'                                                              
The contract had  nothing to do with any of  those formulas you're                                                              
talking about.                                                                                                                  
                                                                                                                                
CHAIRWOMAN  THOMPSON: What  the court  said,  and I'm  sorry if  I                                                              
didn't explain  it well, is that  the incumbent in this  case made                                                              
the argument that this UNE pricing  scheme, this method of setting                                                              
forward-looking prices,  would discourage investment  and what the                                                              
court found  was that's  not true.  There is investment  happening                                                              
both  on the  competitive and  the  incumbent side  and that  this                                                              
particular pricing scheme hadn't discouraged that.                                                                              
                                                                                                                                
SENATOR  DONLEY: Yeah,  but  that court  wasn't  dealing with  the                                                              
Alaska example,  either, was it? I  mean it was dealing  with some                                                              
example  from some place  else generic  and not  dealing with  the                                                              
specific  terms of the  model you  created and  the variables  you                                                              
plugged into the model that you used.                                                                                           
                                                                                                                                
CHAIRWOMAN THOMPSON: No, it was a different UNE model.                                                                          
                                                                                                                                
SENATOR DONLEY:  So, that depends  on an effective model.  If your                                                              
model is  faulty, doesn't  adequately address  the costs  that are                                                              
incurred, then that decision isn't relevant to it.                                                                              
                                                                                                                                
CHAIRWOMAN THOMPSON: It is in terms  of general standards. I think                                                              
there's  two levels  of analysis  here. One  is when  you set  UNE                                                              
prices, what standard  do I have to meet? What am  I trying to do?                                                              
And what  this case  told me is  that I'm setting  forward-looking                                                              
prices.  I'm not supposed  to base  that price  on an  incumbent's                                                              
imbedded costs. The  other level is the part that  you've referred                                                              
to  and we've  talked about  before where  state commissions  have                                                              
some discretion. And that's what  kind of model do we use. I think                                                              
I provided  this after the committee  hearing, a list of  what the                                                              
UNE prices  are in other states  and some states have  used models                                                              
similar to the ones that this commission  and its predecessor used                                                              
- are methods  of analysis, because  it wasn't a  model initially.                                                              
Others  have used  other schemes  and you're  right, that's  where                                                              
states have discretion. They don't  have discretion about what the                                                              
goal is,  but they have  discretion about  the formulas -  I think                                                              
the way we've talked  about it before, but - the  formula tells us                                                              
what the results are supposed to look like.                                                                                     
                                                                                                                                
SENATOR DONLEY:  I think I  understand that philosophy  now better                                                              
that  you make  it  so unattractive  for  the  primary carrier  to                                                              
continue doing  business that hopefully  you force them to  go out                                                              
and invest more to get their costs down.                                                                                        
                                                                                                                                
CHAIRWOMAN THOMPSON: No, we're not trying to force anybody.                                                                     
                                                                                                                                
SENATOR DONLEY: That  seems to be what the federal  court decision                                                              
is saying  but - and  maybe that's worked  in some other  parts of                                                              
the country.  My specific concern  is with the variables  that you                                                              
plugged  into  the model  and  whether  they created  a  realistic                                                              
reimbursement such that  we can still - and my  public policy goal                                                              
in this  - is while encouraging  competition, which I  support, at                                                              
the same  time making sure  that if I build  a house, I can  get a                                                              
phone  line into  it. And if  you've set  the rates  so low,  then                                                              
nobody is willing  to take on the  burden of running a  phone line                                                              
into my house.  That doesn't serve my constituents.  We've heard a                                                              
lot of  testimony in  the last  26 -  27 hours  now that that  has                                                              
occurred  here in  Alaska  and I'm  really  concerned about  that,                                                              
because while I  strongly support competition, I don't  want it at                                                              
the expense of not  being able to get a phone line  into one of my                                                              
people that I represent's house.                                                                                                
                                                                                                                                
CHAIRWOMAN THOMPSON: We have the  same goal. We're concerned about                                                              
service and there's  no doubt that the Telecommunications  Act was                                                              
a  dramatic  change in  the  markets  and  the incident  you  just                                                              
described  of one of  your constituents  not being  able to  get a                                                              
phone line, there was a new subdivision.  ACS said they were going                                                              
to provide  a service  that's called  tellular,  but it's a  radio                                                              
telephone.  The   residents  were  not  happy;   there  were  some                                                              
complaints  I think  in  that subdivision  and  eventually in  the                                                              
subdivision,  I  think, GCI,  the  competitor,  came in  and  laid                                                              
copper.  They can  probably  tell  you the  details  of the  case,                                                              
because we  didn't see it  after. The question  for us as  a state                                                              
commission  is the  type of  service.  It wasn't  that ACS  wasn't                                                              
going to provide  any service; they recognize  their obligation to                                                              
serve  them, but  they  said we  want  to provide  something  that                                                              
doesn't cost us as much to put in.  This radio telephone system is                                                              
actually  portable.  If later  the  residents decide  they  didn't                                                              
want, they could  have picked it out and moved  it somewhere else.                                                              
What we've found,  I think, did we do a final  order in that case?                                                              
Nope, okay. Well, but the inquiry  initially was whether they were                                                              
going to  be able to  provide basic  telephone service,  access to                                                              
emergency services, the thing customers  needed. That's the record                                                              
we were looking  at and those customers did have  service that was                                                              
up to the basic standard levels.  They eventually, as I understand                                                              
it, like I said I don't know what happened after…                                                                               
                                                                                                                                
COMMISSIONER ABBOTT:  They eventually met with all  the developers                                                              
and what  not and  they fixed  the problem.  I think  the case  is                                                              
where they laid wire.                                                                                                           
                                                                                                                                
CHAIRMAN TAYLOR: Who did?                                                                                                       
                                                                                                                                
COMMISSIONER  ABBOTT:  ACS  did.  So,  the thing  was  worked  out                                                              
between the people who needed the  cable and those who hadn't. ACS                                                              
was concerned about  being able to recover their  costs; it wasn't                                                              
just the  cost of laying the  copper into the subdivision.  It was                                                              
putting  the feeder  lines up  to  that to  handle the  additional                                                              
traffic as well. It was a dilemma for them. I understand that.                                                                  
                                                                                                                                
SENATOR DONLEY: And I'm really concerned about that.                                                                            
                                                                                                                                
CHAIRWOMAN THOMPSON: Those customers  all got service. That's what                                                              
we're concerned about.  Who they got it from isn't  as significant                                                              
to us as that they got it.                                                                                                      
                                                                                                                                
SENATOR DONLEY: We've  been doing this for a long  time now. I had                                                              
a memory at some  point in the last 28 hours that  ACS was ordered                                                              
to provide that  service as the primary carrier  and you're saying                                                              
you didn't order them to do it?                                                                                                 
                                                                                                                                
COMMISSIONER  ABBOTT: They  have  a duty  as the  carrier of  last                                                              
resort to do that, to provide that  basic phone service and that's                                                              
what they initially  tried to do with the tellular  system, was to                                                              
do  it  with that.  The  customers  weren't  happy with  that.  We                                                              
started to  look at as  is this really  going to provide  adequate                                                              
basic telephone service, the problem went away.                                                                                 
                                                                                                                                
SENATOR DONLEY:  You see, that's  my concern here. You  forced the                                                              
duty  on the  primary carrier  of  last resort  or whatever  magic                                                              
terminology  you  use,  but  they   aren't  making  a  good  faith                                                              
contention that they  lose money when they do  what you're forcing                                                              
them  to  do.  Something  is  not  right  there.  I  mean  I  want                                                              
competition. I  want the advantages of competition,  especially in                                                              
the urban  areas, but  I think  that my  conclusion after  hearing                                                              
about the federal  act is that it's a balance of  the federal act.                                                              
It's not  just go get competition  everywhere. It's you've  got to                                                              
fully compensate, so it makes sense  and the rural objection is an                                                              
important element  of that.  It seems like  you're out  of balance                                                              
here right  now. I mean I  want the advantages of  competition and                                                              
I'm not saying that either side is  right in this; I'm saying that                                                              
maybe the  solution  is somewhere  in the middle,  but I'm  highly                                                              
suspect of the model that you all  adopted at this point in time -                                                              
highly  suspect  of   it.  It  doesn't  sound   like  it's  really                                                              
functional for the situation we've got here.                                                                                    
                                                                                                                                
CHAIRWOMAN THOMPSON:  I want to go back and clarify  one thing you                                                              
said a couple of minutes ago and  then I'll stop talking about it.                                                              
                                                                                                                                
SENATOR DONLEY: I  don't mean the model; I mean  the variables you                                                              
plugged into the model to be specific.                                                                                          
                                                                                                                                
CHAIRWOMAN THOMPSON: Okay, we didn't  order ACS to lay copper wire                                                              
in that subdivision.  I think that clarification  is important. In                                                              
terms of  the model,  we've said  it before that  that is  an open                                                              
docket pending  before us  and I'm  not comfortable discussing  in                                                              
this  forum our  decision, because  it's a  docket we're  actively                                                              
working on  right now -  at least the  Anchorage UNE  pricing. The                                                              
other UNE  pricing docket for -  I think that there's  been plenty                                                              
of  testimony -  you all  know where  that  case is.  It's at  the                                                              
Supreme  Court.  ACS  didn't  agree  with  our  decision.  It  was                                                              
appealed to  Superior Court; we were  affirmed and it's  active at                                                              
the Supreme Court. I won't go back there again.                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: Let  me just stop you right there.  You just said                                                              
that the Anchorage  UNE price - is that the price  that is applied                                                              
against that new subdivision where  the copper was laid by ACS? If                                                              
their actual  costs, and  whether you  call them projected  future                                                              
costs or not, they were sure projected  future costs when you told                                                              
them  that they  needed  to go  lay cable  because  they were  the                                                              
primary carrier  - I mean lay wire.  You may not have  forced them                                                              
to do it or ordered them to do it,  but obviously the commissioner                                                              
certainly  indicates   there  was  some  level   of  assertion  of                                                              
responsibilities  by  the commission.  And  they're  going to  get                                                              
reimbursed  at a  rate that  is significantly  below their  actual                                                              
cost of  putting those lines  in so that  we can make  certain GCI                                                              
can go  in there and compete  with them? Somehow  they're supposed                                                              
to be encouraged about going out and laying more copper?                                                                        
                                                                                                                                
CHAIRWOMAN  THOMPSON: Your  answer to your  question assumes  that                                                              
ACS is going to lose those customers.  I'm not convinced that they                                                              
will. GCI may  not necessarily get those customers.  Any time, any                                                              
customer has  a choice in Anchorage  who they want to  serve them.                                                              
GCI doesn't...                                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR:  It isn't  much different  per month and  they're                                                              
going to give you  a free computer hook up at  the same time, I'll                                                              
guarantee you  that it's going  to have an  impact. It's had  a 40                                                              
percent impact on  your market already, because  they haven't hung                                                              
any copper in that town. They're  bootlegging right off the top of                                                              
ACS based  on your order.  If your order  were sitting there  on a                                                              
level  playing  field  where  they  had to  pay  the  actual  cost                                                              
incurred by  ACS, what do  you call them?  The embedded  costs? If                                                              
they had to pay  their portion for their use exactly  like ACS has                                                              
to  pay  theirs   every  day,  then  you'd  have   fair  and  open                                                              
competition. You don't  have that and that's why  Senator Donley's                                                              
concerned about  why are subdivisions  going through  this process                                                              
of having to  negotiate and having to come before  your commission                                                              
before they can get any copper wire laid?                                                                                       
                                                                                                                                
CHAIRWOMAN  THOMPSON: Senator  Taylor, the  United State  Congress                                                              
and the  Supreme Court  has told  me that I'm  not allowed  to use                                                              
embedded costs.                                                                                                                 
                                                                                                                                
CHAIRMAN  TAYLOR: They  didn't tell  you that;  they told you  you                                                              
could come  up with a  model. You then  chose, you  arbitrarily as                                                              
commissioners chose what numbers  you would accept and put in this                                                              
model.                                                                                                                          
                                                                                                                                
CHAIRWOMAN  THOMPSON: No, the  words "embedded  costs" are  in the                                                              
Telecommunications Act and they're  in the Supreme Court decision.                                                              
If you  want me to  read that paragraph  from the holding,  I'd be                                                              
happy to. Otherwise  I can provide it for you. We  are not allowed                                                              
to use embedded costs. The Act and  this decision contemplate this                                                              
forward-looking cost model.                                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR:  Right. Let's  just  take the  new  subdivision.                                                              
Forward-looking  cost model -  that's the  one you're supposed  to                                                              
use on that new subdivision?                                                                                                    
                                                                                                                                
CHAIRWOMAN THOMPSON:  What the standard  would be is that  how the                                                              
network would  be rebuilt  if it  were built  today. Now,  this is                                                              
going  to be  different,  because in  that  new subdivision,  it's                                                              
presumably they're  going to be able  to take care of some  of the                                                              
changes in pricing. The cost of this  technology has declined over                                                              
time  and  I  think  that's  what  Congress  was  trying  to  give                                                              
consumers  the benefit  of. If  they were  rebuilding the  network                                                              
today, it's not going to cost as much probably.                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: They  did rebuild up in that area  today and what                                                              
did it cost them? Did it cost them  as much or are you saying that                                                              
somehow  through a  mystical theory  you've got  that it  actually                                                              
cost them less for their personnel to go out.                                                                                   
                                                                                                                                
CHAIRWOMAN  THOMPSON: I  don't know.  I don't  have to respond  to                                                              
your question, Senator Taylor. I  don't have the information about                                                              
what it actually cost them to wire that subdivision.                                                                            
                                                                                                                                
CHAIRMAN  TAYLOR: But  you know  the  rate, because  the rate  has                                                              
already been set.                                                                                                               
                                                                                                                                
CHAIRWOMAN THOMPSON:  I know that what  the UNE rate is  now and I                                                              
know what it was when we gave them  an interim increase and I know                                                              
what they've  asked for and that,  as I explained, is  the subject                                                              
of an open docket before us.                                                                                                    
                                                                                                                                
SENATOR  DONLEY:  Could I  just  ask  a technical  question  here?                                                              
There's more  that goes into how  you set that rate than  just the                                                              
cost of running the wire into a subdivision. Isn't that right?                                                                  
                                                                                                                                
CHAIRWOMAN THOMPSON:  Certainly. There are many,  many elements. I                                                              
think some of these.                                                                                                            
                                                                                                                                
SENATOR DONLEY:  You couldn't just go  find out what the  bill was                                                              
and divide it by the number of houses and have your rate.                                                                       
                                                                                                                                
CHAIRWOMAN THOMPSON: No.                                                                                                        
                                                                                                                                
SENATOR  DONLEY:  You would  have  to  also  figure in  the  back-                                                              
looking, I forgot the word you used,  the existing system and then                                                              
discount it  to be consistent with  the federal law as  you sit it                                                              
there to come up with some sort of actual cots.                                                                                 
                                                                                                                                
CHAIRWOMAN  THOMPSON: And  that's  one of  the  issues when  we're                                                              
looking at which model to pick -  how much - delivering service to                                                              
a customer  isn't just the  final loop.  It's back to  the switch.                                                              
There's feeder cables.  Those feeder cables are  used by different                                                              
customers. How  do you allocate  the costs between  customers? How                                                              
do you make sure  that the common costs and  [indisc] are properly                                                              
allocated  or  not?  It's a  very  complex  issue  and I  don't  -                                                              
Commissioner  Abbott may remember  how many  inputs some  of these                                                              
different models have, but some of  them have - that's part of the                                                              
complexity that you're delving into there.                                                                                      
                                                                                                                                
COMMISSIONER ABBOTT:  That was one  of the things  the arbitrator,                                                              
when they  sat down  and did  all of  the inputs  into it,  he put                                                              
those  in and  came  up with  the  various answers,  both  parties                                                              
coming up with  their own answer, which we then,  if they couldn't                                                              
reach  agreement   on  a  particular  cost,  then   they  went  to                                                              
arbitration. They did their baseball.                                                                                           
                                                                                                                                
SENATOR DONLEY: Boy, I think that was a mistake.                                                                                
                                                                                                                                
COMMISSIONER ABBOTT:  The arbitrator, based on what he  can use as                                                              
far  as  the FCC  guidelines,  would  now  come  up with  what  he                                                              
considered to be the best offer. [Indisc]                                                                                       
                                                                                                                                
SENATOR DONLEY:  I've come  to the  personal conclusion  that this                                                              
baseball arbitration is not the way  to go in a telecommunications                                                              
where you're  dealing with a public  service. I mean it  may be if                                                              
you've  got two private  companies  that are slugging  it out  and                                                              
you've got an  arbitrator, but not when there's  a public interest                                                              
involved. I  mean that's what I  think the role of  the commission                                                              
is to set  a reasonable rate and  not rely on two  warring parties                                                              
to pick  one or the  other. I don't  think that really  serves the                                                              
public as well as  if you all make a decision  based on the merits                                                              
rather than what two parties who  are competitors, pick one or the                                                              
other. It just doesn't seem like good public policy to me.                                                                      
                                                                                                                                
CHAIRWOMAN  THOMPSON: I  would agree  with you  - had we  ultimate                                                              
flexibility, that  we would probably use a different  method. When                                                              
you  do  under  the  Telecommunications   Act,  there  are  really                                                              
specific  deadlines about  how  quickly we  have  to decide  those                                                              
interconnection  prices and  I think  in  180 days  from start  to                                                              
finish. So,  we've got  to wade through  all these complex  issues                                                              
within  that  period  of  time  and   approve  an  interconnection                                                              
agreement. What happens under the  Act is the parties are supposed                                                              
to talk  to each other  for a certain period  of time and  try and                                                              
reach agreement  and if after they've  been talking to  each other                                                              
and try to  negotiate an agreement  for a certain period  of time,                                                              
they don't,  then they can  come to us and  we have 180  days from                                                              
the time  we get  a request  to have  an approved  interconnection                                                              
agreement on  the books  and it's  a huge task  in that  period of                                                              
time  considering there's  a lot  of  other things  going on.  So,                                                              
whether or  not it is a method  we use again, it's something  - it                                                              
was an option  that the parties discussed that  we eventually used                                                              
because it was a way to get through  the huge amount - and I think                                                              
either of the parties involved in  that would be happy to bore you                                                              
to death with how much time it took.                                                                                            
                                                                                                                                
SENATOR  DONLEY: You  know  what?  I'm not  here  for the  parties                                                              
involved. I'm here for the public.  I'm here for the consumers and                                                              
the people  who just want to have  a telephone in their  home. So,                                                              
it  may have  been  convenient  for the  parties,  but  it is  not                                                              
necessarily  the best  public policy.  I have  really reached  the                                                              
conclusion after  six days of these  hearings that that's  a lousy                                                              
way of  arbitrating  the public's  interest in  this. It may  have                                                              
been a  convenient way for the  commission to meet  their timeline                                                              
and it may  have been a convenient  way for the parties,  but when                                                              
you've  got two  parties that  traditionally have  been such  very                                                              
difficult rivals, if  they don't reach some sort  of middle ground                                                              
here, then the  public is left with two bad  decisions rather than                                                              
one reasonable  one. Two  bad options is  not good public  policy.                                                              
Choosing between  two bad options,  if there's the  possibility of                                                              
reaching some sort of middle ground  that makes more sense for the                                                              
public, just because the parties are not agreeing.                                                                              
                                                                                                                                
CHAIRWOMAN THOMPSON: I appreciate your comments, Senator Donley.                                                                
                                                                                                                                
COMMISSIONER ABBOTT: I don't want  to belabor this point, but when                                                              
we talk about the person we had doing  adjudication, which for all                                                              
practical purposes  was an administrative  law judge, the  man who                                                              
did, he sat  on the bench.  He's been a substitute  Superior Court                                                              
judge; he's been a substitute District  Court judge. He'd done all                                                              
that and when he  sat down with the parties, not  only was his job                                                              
to try to do the  arbitration of it, but his job was  to see if he                                                              
couldn't adjudicate  and get  them together -  and that's  what he                                                              
tried on every  issue - was first  of all try to get  them to come                                                              
to an  agreement among  themselves. And he  worked pretty  hard at                                                              
that and then  it was the last  resort when they just  couldn't do                                                              
that to  where he said,  'Okay, give me  your best shots;  give me                                                              
your best pitch.' And in that case, that's the way it went.                                                                     
                                                                                                                                
SENATOR DONLEY:  Would you explain that  to me? Who said  you have                                                              
to take  one or  the other?  Who made  that decision?  Was it  the                                                              
commission? Was it the arbitrator?  Was it the parties? Who put it                                                              
on the people of  Alaska that that's how we're going  to make that                                                              
decision and the consequences.                                                                                                  
                                                                                                                                
COMMISSIONER ABBOTT: Is that in the federal act?                                                                                
                                                                                                                                
CHAIRWOMAN  THOMPSON: No, it  just says  we arbitrate.  It doesn't                                                              
say the methodology.                                                                                                            
                                                                                                                                
COMMISSIONER ABBOTT:  Yes, I  believe it was  in ours, but  let me                                                              
just go back to your...                                                                                                         
                                                                                                                                
SENATOR DONLEY: I don't understand. Who made that decision?                                                                     
                                                                                                                                
CHAIRWOMAN  THOMPSON: It  was in  our order. I  don't remember  if                                                              
that one was  agreed to by the  parties or not. I know  it was the                                                              
method that was  used by the APUC in the earlier  arbitration that                                                              
predated  us.   And  I  honestly   don't  remember   whether  they                                                              
stipulated or it  was proposed by one of them, anyway  and we must                                                              
have decided…                                                                                                                   
                                                                                                                                
SENATOR  DONLEY:  Why should  two  private  parties that  are  for                                                              
profit be able  to stipulate what's in the interest  of the people                                                              
of Alaska?                                                                                                                      
                                                                                                                                
CHAIRWOMAN  THOMPSON:  It's  them  agreeing  to  what  methodology                                                              
you're going to  use. That type of arbitration is  designed to cut                                                              
through some of the baloney and get  people to put their best foot                                                              
forward. If you  have a lot of issues to decide  in a short period                                                              
of time, you don't want people dinking  around with posturing. You                                                              
want them really  to think about what it is that  they really need                                                              
and to give the hearing officer the  best choices. In this case, I                                                              
don't know  how many issues there  were. The hearing  examiner was                                                              
successful in  the Juneau and  Fairbanks arbitrage in  getting the                                                              
parties to agree  on many of the issues, but they  were in hearing                                                              
for many,  many, many days  and they  would adjourn and  come back                                                              
and adjourn  and come  back and adjourn  and come  back. It  was a                                                              
long process.                                                                                                                   
                                                                                                                                
CHAIRMAN  TAYLOR:   You  people  have  obviously   never  done  an                                                              
arbitration. I'll  guarantee you  if I'm for  profit and I  get to                                                              
choose which one I'm going to use  and I've got nothing to lose in                                                              
this operation, my whole goal is  to chisel this loop rate down as                                                              
low  as I  can get  it, I'm  going to  love baseball  arbitration,                                                              
because I'm going to come in and  lowball every single one of them                                                              
and if all I do  is flip a coin and I only get  half of them, I've                                                              
just  crucified the  competition.  That's if  I only  get half  of                                                              
them.                                                                                                                           
                                                                                                                                
SENATOR DONLEY:  And the reason I'm  really pursuing this  is that                                                              
I'm thinking  this  is one  of the roots  of the  problem is  what                                                              
we're hearing about. I'm really considering  adopting some sort of                                                              
specific arbitration  criteria for  in the  future that  bans this                                                              
kind of  thing because  I think it's  a lose-lose proposition  for                                                              
the people  of the state.  I don't think  you get a  fair rational                                                              
basis for  cost if it's this  baseball arbitration. I  mean you're                                                              
going to  get one of  two biased  prejudiced for profit  proposals                                                              
instead of  something that's really  a rational decision  based on                                                              
the merits of what's in the public's interest.                                                                                  
                                                                                                                                
SENATOR  THERRIAULT: It's  going  to be  more  expensive and  take                                                              
longer. I always  enjoyed economics and took lots  of economics in                                                              
college. There's  a whole  economic theory on  this and  it's more                                                              
designed  for wage  negotiations  rather  than this.  But  they're                                                              
right. It  supposedly cuts  through a  bunch of  crap and  I don't                                                              
know if you're going  to get them to select you  50 percent of the                                                              
time.                                                                                                                           
                                                                                                                                
CHAIRMAN  TAYLOR: If  you  get 80  percent,  you've  really got  a                                                              
windfall profit, don't you?                                                                                                     
                                                                                                                                
SENATOR  THERRIAULT:  But,  if  your offer  is  determined  to  be                                                              
egregious...                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR:  It isn't determined  to be egregious.  It's your                                                              
last best offer and it's their last best offer and he picks one.                                                                
                                                                                                                                
SENATOR THERRIAULT:  But the  hearing officer  is looking  for the                                                              
one that's the most reasonable.                                                                                                 
                                                                                                                                
SENATOR  DONLEY: Let's  talk about  what's  the hearing  officer's                                                              
point of view. You're the hearing  officer, right? And you're here                                                              
right now. If you pick the low one,  well, consumer rates go down,                                                              
right? And  everything is hunky dory.  Now 10 years from  now, you                                                              
may have a big problem by picking  the low rate, but right now the                                                              
pressure is going  to be on you to always go lower  rather than to                                                              
look  at the  long term,  because he's  probably not  going to  be                                                              
around in 10 years.                                                                                                             
                                                                                                                                
SENATOR  THERRIAULT:  I don't  know  if that's  necessarily  true.                                                              
Hopefully, the  hearing officer has at  least one eye on  the long                                                              
term. His job isn't necessarily dependent  on whether his decision                                                              
is to lower the rates.                                                                                                          
                                                                                                                                
CHAIRWOMAN THOMPSON:  That's correct.  The standard is the  one in                                                              
the act;  it's the forward  looking price  that sets  the criteria                                                              
and what  the FCC and  now the Supreme  Court has said  about what                                                              
you should  be looking at when  you're deciding how  to compensate                                                              
the incumbent  for the use of  their network. It's not  best price                                                              
to consumers.                                                                                                                   
                                                                                                                                
SENATOR  THERRIAULT:  Well, I  think  we ought  to  be careful  in                                                              
beating them up  on one side for not making  decisions soon enough                                                              
and then  possibly suggesting  in the process  they need  longer -                                                              
they would need more time.                                                                                                      
                                                                                                                                
CHAIRMAN  TAYLOR:   I  don't  know  that  there's   any  testimony                                                              
especially  from  this  commission, because  they've  never  tried                                                              
anything  else,  but   I  don't  know  if  there's   any  evidence                                                              
necessarily  that  baseball  arbitration is  somehow  faster  than                                                              
other forms of arbitration. I'll  guarantee you that no contractor                                                              
in his right mind  is going to walk into a deal  with an owner and                                                              
play baseball arbitration on their  cost overruns, on their claims                                                              
on a contract. They're not going  to do that. All you've got to do                                                              
is lose one and you've lost the ball game.                                                                                      
                                                                                                                                
SENATOR   THERRIAULT:   That's  used   all   the   time  in   wage                                                              
negotiations.                                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: It  is because the strike is  the alternative and                                                              
there  isn't  an   alternative.  It's  finality   in  that  strike                                                              
opportunity. That isn't  the case here. You make  a wrong decision                                                              
here and rates may go down, but you  end up with one monopoly five                                                              
years out and  you've bankrupted the other one.  That's my concern                                                              
about where we're  going with all this stuff, but  I'd like to get                                                              
back to something real simple. Forward-looking costs, right?                                                                    
                                                                                                                                
CHAIRWOMAN THOMPSON:  I don't know if that's real  simply, but I'm                                                              
happy to talk about it further if you'd like to, Senator.                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: You've  made some  misstatements  about it  that                                                              
computers have come  down in cost and new technology  should bring                                                              
the cost  down and so  on. Does it cost  less to run  copper today                                                              
than it did five years ago?                                                                                                     
                                                                                                                                
CHAIRWOMAN  THOMPSON:  I don't  know  the difference  between  the                                                              
price of copper now and five years ago.                                                                                         
                                                                                                                                
CHAIRMAN TAYLOR:  Let me tell you  somebody who does.  The AFL-CIO                                                              
who just came  down with a resolution telling  this legislature do                                                              
not extend  this commission. Now, why  in the world would  they be                                                              
interested in doing that?                                                                                                       
                                                                                                                                
SENATOR  DONLEY: I  don't think  it's fair  to ask  the people  to                                                              
speculate on other people's motives.                                                                                            
                                                                                                                                
CHAIRMAN TAYLOR:  Let me put  it a different  way. If in  fact the                                                              
future  cost model that  you're talking  about  is truly going  to                                                              
compensate  the person  investing in  putting it  in there  and if                                                              
there's some  reason for doing this,  how exactly does he  do that                                                              
if he  still has  to hire  the same  IBEW folks  at the  increased                                                              
[price] to  go out there the next  day and install that  copper if                                                              
you're not going to give him credit  for that new embedded cost in                                                              
that line.                                                                                                                      
                                                                                                                                
CHAIRWOMAN THOMPSON:  That is what  the Supreme Court has  told me                                                              
I'm not allowed  to do. Senator Taylor, I know you're  a lawyer; I                                                              
know you've  read plenty  of these decisions.  I brought  one here                                                              
that I  would be happy  to provide the  committee. It's  a complex                                                              
issue and I think reading this would  help everyone understand it.                                                              
                                                                                                                                
CHAIRMAN  TAYLOR: Believe  me  I think  the  IBEW understands  it.                                                              
They're going  through their second  lay-off phase with  ACS right                                                              
now  and  they're  the single  biggest  employer  of  these  folks                                                              
probably in the state. I think they  understand full well what the                                                              
ramifications  have  been of  the  models  you've chosen  and  the                                                              
decisions you have  made. I can't explain this to  them and I hope                                                              
that you can.                                                                                                                   
                                                                                                                                
SENATOR COWDERY: I  asked some questions the other  day, but first                                                              
for my  information I'd  like to know  how many entities  does RCA                                                              
deal with?                                                                                                                      
                                                                                                                                
CHAIRWOMAN  THOMPSON:  We  regulate   -  the  total  number?  It's                                                              
different  if   you  talk  about  certificated   and  economically                                                              
regulated.  I should know  off the  top of my  head, but  I don't.                                                              
There's  between 600 and  700 probably  certificated utilities  in                                                              
the state.  Many of those  are not economically  regulated because                                                              
they're owned  by local  government. There's  an exemption  in the                                                              
statute for that.                                                                                                               
                                                                                                                                
SENATOR COWDERY: Do you deal with them?                                                                                         
                                                                                                                                
CHAIRWOMAN THOMPSON:  We deal with them  in the sense that  we had                                                              
to grant  a certificate of  public convenience and  necessity when                                                              
they first  went into  operation. And  some of  those who  are not                                                              
economically regulated  that received for example,  PCE credit, we                                                              
still deal  with them  even though  we don't  set their  rates. We                                                              
review their costs to evaluate how much PCE they're entitled to.                                                                
                                                                                                                                
SENATOR COWDERY:  What do you attribute  the backlog you  have now                                                              
to?                                                                                                                             
                                                                                                                                
CHAIRWOMAN  THOMPSON:  The  backlog  we  have now  that  has  been                                                              
discussed is  not - most of the  cases that are open  now are ones                                                              
that have  come in  since the RCA  was formed.  We have  less than                                                              
half the number of cases we had opened in 1999.                                                                                 
                                                                                                                                
SENATOR COWDERY:  You said  that the  other day,  but when  we got                                                              
down to it a  lot of the cases, the big cases,  are still pending,                                                              
a lot of them - the nickel and dime ones.                                                                                       
                                                                                                                                
CHAIRWOMAN THOMPSON:  Maybe the  misunderstanding is  because this                                                              
number didn't  just go  down to  somewhat less  than 400.  This is                                                              
while all  the new cases  were coming  and being processed.  So we                                                              
are  reducing  the backlog  at  the  same  time we  were  handling                                                              
ongoing cases.                                                                                                                  
                                                                                                                                
SENATOR COWDERY: That's  my point. What would it  take to get more                                                              
people, more  commissioners so  you wouldn't  have the  backlog of                                                              
400? Why couldn't  you keep up within a reasonable  time if we had                                                              
guidelines in  this new bill?  How are you  going to -  what would                                                              
you suggest?                                                                                                                    
                                                                                                                                
CHAIRWOMAN  THOMPSON:   The  400  isn't  necessarily   a  backlog,                                                              
Senator. They  are cases  that are somewhere  in our  process. For                                                              
example,  applications are  processed within  a certain period  of                                                              
time.  We have  an obligation  to  give the  public notice,  allow                                                              
comments  and so  that counts  as  one. That's  all. Those  aren't                                                              
backlogged dockets; it's pending dockets.                                                                                       
                                                                                                                                
SENATOR COWDERY: The 400 are things that need decisions then?                                                                   
                                                                                                                                
CHAIRWOMAN THOMPSON:  They're not all ripe for  decision. They are                                                              
cases  that are  active. Some  of  them we're  waiting for  public                                                              
comments. Some of  them are waiting for a motion.  We can't make a                                                              
decision on them.                                                                                                               
                                                                                                                                
SENATOR COWDERY:  You can't conform  to some things in  this House                                                              
bill  if we  set timelines  and guidelines?  Is  that what  you're                                                              
saying?                                                                                                                         
                                                                                                                                
CHAIRWOMAN  THOMPSON:  That  isn't  what  I'm  saying.  I  had  an                                                              
opportunity shortly  before the hearing  started yesterday  to see                                                              
these  guidelines.  As  Mr. Yould  testified  during  the  regular                                                              
session,  there were discussions  about  guidelines we could  live                                                              
with and comply  with and I agree then in my  testimony, I believe                                                              
it was yesterday before the House  Finance Committee, was that the                                                              
additions  made in  this  bill were  ones I  could  live with  and                                                              
comply with.                                                                                                                    
                                                                                                                                
SENATOR COWDERY:  By that, do you  mean that the  public decisions                                                              
would be acted on in a quicker sense than they are now?                                                                         
                                                                                                                                
COMMISSIONER ABBOTT: If I could deal  with that for just a second.                                                              
As we've talked about, we've come  down from 800 to around 400 and                                                              
what the  level is going to  be down here  if we met all  of these                                                              
guidelines of  everything that  walked in the  door, I  don't know                                                              
what that level is going to be. My  guess is that it's going to be                                                              
some place between 200 and 300 dockets  that we're always going to                                                              
have open  in the commission. We're  just [not] going to  get down                                                              
below  that. As  we've worked  our  way down  through that,  we've                                                              
gotten faster. I  can't quantify that for you  specifically. I can                                                              
tell  you from  my own  experience  that we've  gotten better  and                                                              
we're working  them faster  than we  were. I  can't tell  you when                                                              
we're going to hit that 200 or 300  level, but I don't think we're                                                              
that far away from it and these guidelines  to me don't scare me a                                                              
bit. There's  going to  be somewhere  we'll come  back to  you and                                                              
tell you we missed it. We didn't  get there and that's going to be                                                              
part of the  thing that I  talked to Senator Donley  about before.                                                              
We tend to be the battleground and  it's them versus them. Some of                                                              
those are  going to be  carried out longer.  There just  isn't any                                                              
way we're  going to beat  them down through  there. I  don't think                                                              
we're more than a year away from  getting to that sustained level.                                                              
                                                                                                                                
SENATOR  COWDERY: I  realize that  you're  never going  to have  a                                                              
clear nothing to do.                                                                                                            
                                                                                                                                
CHAIRWOMAN  THOMPSON: I think  it's important  to realize  that we                                                              
don't have  control over  what comes in  our door. That's  for the                                                              
industry.                                                                                                                       
                                                                                                                                
SENATOR COWDERY:  You have control  over what goes out  your door,                                                              
right?                                                                                                                          
                                                                                                                                
CHAIRWOMAN  THOMPSON: We do  and I'm  not sure that  200 -  300 is                                                              
realistic. I think  350. That's what we put in  the annual report.                                                              
We don't  have control  over when things  get filed by  utilities.                                                              
You can  tell them to  stop filing stuff  and then we'll  clear up                                                              
our backlog.                                                                                                                    
                                                                                                                                
SENATOR COWDERY: You would be without a job if nobody filed.                                                                    
                                                                                                                                
CHAIRWOMAN THOMPSON:  Like Commissioner  Abbott said, I  agree, if                                                              
people stop  filing requests  for assistance,  if we stop  getting                                                              
consumer complaints, you should sunset us.                                                                                      
                                                                                                                                
SENATOR COWDERY: The  question I asked you last week  and you were                                                              
going to look up on this trip that  you went out there and decided                                                              
it was pleasure and not business, did you file leave slips?                                                                     
                                                                                                                                
CHAIRWOMAN THOMPSON:  No and  I looked at  the dates. I  got there                                                              
Friday night and I was there over  the weekend and I don't have to                                                              
turn in a leave slip when I'm there over the weekend.                                                                           
                                                                                                                                
SENATOR COWDERY: What date was that?                                                                                            
                                                                                                                                
CHAIRWOMAN THOMPSON:  I believe it was  the 6, 7 and 8  of July in                                                              
the year 2000 and it was a Friday, Saturday, Sunday.                                                                            
                                                                                                                                
SENATOR COWDERY: Friday you would have had to file a leave slip.                                                                
                                                                                                                                
CHAIRWOMAN THOMPSON:  I didn't go in  the morning. I left  late in                                                              
the afternoon.                                                                                                                  
                                                                                                                                
SENATOR COWDERY: I've got to go.                                                                                                
                                                                                                                                
CHAIRWOMAN  THOMPSON: I've got  a few  more notes about  questions                                                              
that were asked that I wanted to  be responsive to and one of them                                                              
was the certification process and  what our role is when companies                                                              
receive universal service funds.  You, Senator Taylor, seemed like                                                              
you  wanted more  explanation of  what we  do. That  process is  a                                                              
recent shift in FCC policy. Last  year is the first time we had to                                                              
do it.  What the FCC  said when it  required state  commissions to                                                              
certify is that  we're supposed to certify that  they're using the                                                              
funds  properly  and  the  reason   they  did  it  and  gave  that                                                              
responsibility  to  the  states,   and  properly  means  universal                                                              
service is  supposed to  reduce the cost  of bringing  local phone                                                              
service  down to  some reasonable  rate  on a  national basis.  So                                                              
we're supposed to certify after looking  at a company's records or                                                              
whatever  information we  feel  like we  need  from the  company's                                                              
records that  that's what they are  doing. The reason the  FCC did                                                              
that is  because there's  criticism from  mostly the urban  states                                                              
that, 'Gee, we're  sending all this money out to  the rural states                                                              
and they're  over recovering.' They  have these really  high rates                                                              
of return.  So the  FCC said,  'Alright, we're  going to  make all                                                              
state commissions  responsible for making sure that  the companies                                                              
in  their  state that  get  this  money  are reducing  rates  like                                                              
they're supposed to  in the program.' That's a  certification that                                                              
has to be done annually and our certification  is due the first of                                                              
October to  the commission. Last year,  the first time we  did it,                                                              
we had  a workshop with  industry and said,  'How are we  going to                                                              
cope with this? What kind of information  can you provide us?' And                                                              
we developed  a worksheet that is  as simple as possible  in order                                                              
to not be burdensome.  They filed it, we reviewed  it and we filed                                                              
our  certification with  the FCC.  There's  been suggestions  this                                                              
year that we  modify the process after they lived  through it once                                                              
and  that's  something  else  we're in  the  process  of  actively                                                              
considering. We have  to make a decision on that  soon enough that                                                              
they will be able to file the information.                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR: Is it a fairly simple process?                                                                                 
                                                                                                                                
CHAIRWOMAN  THOMPSON: It  requires  us to  examine  the books  and                                                              
records or certain  information in their books  and records. We're                                                              
supposed  to make  sure that  they're  using the  money to  reduce                                                              
local rates. They  have to show us through  accounting information                                                              
that they're not using it for anything else.                                                                                    
                                                                                                                                
CHAIRMAN  TAYLOR:  And  the  question  you  were  discussing  with                                                              
Senator Donley earlier  that he had a hard time  understanding why                                                              
it was  working  and I do  to. How  again do  you explain  passing                                                              
through those funds to a carrier that has no copper?                                                                            
                                                                                                                                
CHAIRWOMAN  THOMPSON:   Because  those  funds  are   available  to                                                              
carriers who  offer telecommunications  services. The Act  is what                                                              
the  policy folks  call  technology neutral.  It  was designed  to                                                              
advance  America's telecommunications  network  in recognition  of                                                              
the  fact that  copper  isn't  the  only way  people  communicate.                                                              
People communicate wirelessly. People  can communicate using fiber                                                              
optic cable; people can use satellite.                                                                                          
                                                                                                                                
CHAIRMAN  TAYLOR:  These  people   are  communicating  on  copper;                                                              
they're just bootstrapping on it off of your UNE rate.                                                                          
                                                                                                                                
CHAIRWOMAN THOMPSON: Some of them  are communicating on copper and                                                              
some of  them are using other  technologies. The only  other issue                                                              
that I had notes  that I wanted to respond to  something that came                                                              
up was just some  general comments about the speed.  That's been a                                                              
recurring  theme  in  these hearings  that  folks  have  expressed                                                              
frustration  that we  make decisions  too slow.  When I  testified                                                              
before, I talked about the process  that we have and the fact that                                                              
commissioners  make decisions  in a  group and  that's one  of the                                                              
tradeoffs for  making decisions  more quickly.  It's a  lot easier                                                              
for one person  to make a decision  on things than three,  but the                                                              
legislature  originally  when it  created  us decided  that  there                                                              
should be group decisions and that's  one way if you want to speed                                                              
us up you  can change the process,  but I don't think  that's good                                                              
public   policy,  because   I  think   the   group  process,   and                                                              
Commissioner  Abbott should speak  to this, too,  but we  all come                                                              
from different perspectives  and we bring a different  analysis to                                                              
the table when we discuss cases and  that's good. I think it makes                                                              
our  decisions better  in the  long run,  but it  also takes  more                                                              
time. Due  process is another  thing that  takes time and  in your                                                              
courtroom, Senator Taylor, I'm sure  you dealt with that, but it's                                                              
important  that  parties are  treated  fairly and  sometimes  that                                                              
takes time and  it's a tradeoff that you make.  It's important for                                                              
us in  order for parties  to feel like  our decisions are  fair to                                                              
make decisions  based on the record  before us. That's one  of the                                                              
standards  of  court  reviews  when   they  read  it.  So,  that's                                                              
something  else  we  can,  but  what   I  suggest,  this  advisory                                                              
committee  that's discussed  in  the bill,  if  speed of  decision                                                              
making  and   understanding  that  process  is   something  that's                                                              
important enough, that's  the kind of thing that  a group can look                                                              
at and understand.                                                                                                              
                                                                                                                                
Other than that,  I was going to offer general  comments about the                                                              
bill. I  think the  deadlines are  ones that we  can live  with. I                                                              
think  the  advisory  committee   may  be  able  to  offer  useful                                                              
comments. It's helpful to have members  from all different sectors                                                              
of the industries  we regulate if you want to get  some balance in                                                              
the group,  because I think it  would be helpful to  them, because                                                              
often what  we hear  it's probably much  the same position  you're                                                              
in.  You hear  one side  arguing  for something  and another  side                                                              
arguing just as adamantly for something  else. That happens across                                                              
industries, too,  and it might be  helpful to them in  designing a                                                              
better process  to hear from all  sides. The monthly  meetings are                                                              
also something that would be formalizing  in the statute the bench                                                              
and bar process that we just started  and speeding it up, frankly,                                                              
but  if  it  would  help to  provide  a  regular  forum  at  which                                                              
processes can be discussed and have  that process more formalized,                                                              
that's something I would welcome, as well.                                                                                      
                                                                                                                                
SENATOR DONLEY: I appreciate your  answers. We've been here for so                                                              
long. I'm just  getting anxious about this. I think  I was getting                                                              
over-emotional about  it, but it  seems like I'm starting  to zero                                                              
in on  where some  of these  problems are  and I fully  appreciate                                                              
Senator Therriault's  point, too, that it's a balance  of the time                                                              
concerns versus trying to get a fair  decision and it's tremendous                                                              
challenge in something that's this  complicated. I appreciate your                                                              
being here to interact with us.                                                                                                 
                                                                                                                                
CHAIRWOMAN THOMPSON: Thank you, Senator Donley.                                                                                 
                                                                                                                                
SENATOR THERRIAULT: You were not  able to be up in LB&A today, but                                                              
I  know you  were  there earlier  before  we went  into  executive                                                              
session. I just  wanted to let you know that as  far as... [END OF                                                              
SIDE A]                                                                                                                         
                                                                                                                                
TAPE 02-49, SIDE A                                                                                                            
7:30 p.m.                                                                                                                       
                                                                                                                              
SENATOR THERRIAULT: ...that public  complaints section review that                                                              
LB&A did,  Pat Davidson, the auditor,  said she wished  more state                                                              
agencies had that kind of record,  that you did very well there. I                                                              
just wanted  to touch real quickly  on the recommendations  in the                                                              
audit. Recommendation  number  one, dealing  with the small  water                                                              
and sewage utilities, you've got something going on that?                                                                       
                                                                                                                                
CHAIRWOMAN THOMPSON:  Yes, we've issued a notice  of proposed rule                                                              
making and  we're inviting comments.  There's a hearing  scheduled                                                              
for after the comment  cycle is over and the comments  are all due                                                              
by some time in July and there's  a hearing scheduled in August on                                                              
that.                                                                                                                           
                                                                                                                                
SENATOR  THERRIAULT: Recommendation  number two  - clarifying  the                                                              
use of the public advocacy section.                                                                                             
                                                                                                                                
CHAIRWOMAN  THOMPSON:   That  was   one  where  regulations   were                                                              
proposed, as well. There were draft  regulations put out to notice                                                              
for comment. That  comment cycle is complete. There  was a hearing                                                              
scheduled for  it next Monday  and I saw  some E-mails when  I was                                                              
gone  last   week  that  the   hearing  might  have   been  moved.                                                              
Commissioner Abbott  can tell you  whether we're going to  do that                                                              
Monday or later in the month.                                                                                                   
                                                                                                                                
COMMISSIONER ABBOTT:  We're going to it a little  bit later in the                                                              
month. It's not going very far time wise.                                                                                       
                                                                                                                                
SENATOR THERRIAULT:  And then number three should  insure that the                                                              
publication of notices and formal proceedings be monitored.                                                                     
                                                                                                                                
CHAIRWOMAN THOMPSON:  We did that.  We implemented a  new internal                                                              
proceeding  to   monitor  notices  after  we  got   the  auditor's                                                              
recommendation.                                                                                                                 
                                                                                                                                
SENATOR THERRIAULT:  And the other thing, MIS system,  in place or                                                              
shortly?                                                                                                                        
                                                                                                                                
CHAIRWOMAN THOMPSON:   In place. It's not something  that you flip                                                              
the  switch  and it  goes  on. It's  been  implemented  gradually.                                                              
There's more  information available over  the web. We're  using it                                                              
internally to  circulate documents and  get rid of the  mail carts                                                              
up and down the  hall. So, yes, it's always going to  be a work in                                                              
progress, because  as our organization changes, the  system has to                                                              
change, but it's pretty much up and running.                                                                                    
                                                                                                                                
SENATOR THERRIAULT: Okay, I just  wanted to touch on those, number                                                              
one, and  to make  sure that  every committee  considers them  and                                                              
when I had talked to Senator Stevens,  Alaska Senator Ben Stevens,                                                              
when  he  put  the  bill in,  was  he  could  look  through  these                                                              
recommendations,  have a hearing  and if  they determine  that the                                                              
commitment you  had made through  regulatory process was  going to                                                              
bring a good  result on these, then fine. If  not, the legislature                                                              
could make a policy call to give  you statutory direction on these                                                              
and that  was fine.  So I,  just as  LB&A chairman,  made sure  he                                                              
brought those  up in his  committee and,  in looking at  the Labor                                                              
and Commerce record, they did. As  chairman of LB&A, I've tried to                                                              
make sure  that the findings of  the audits are considered  by the                                                              
legislature and it  appears that you've got regulations  to follow                                                              
through on all of these. Thank you.                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR: ETC, Ketchikan?                                                                                                
                                                                                                                                
CHAIRWOMAN THOMPSON: Is Ketchikan public utilities?                                                                             
                                                                                                                                
CHAIRMAN TAYLOR: [Indisc.]                                                                                                      
                                                                                                                                
CHAIRWOMAN  THOMPSON: [Indisc.]  application by  AP&T wireless  to                                                              
offer  service  in  Ketchikan.  They have  also  applied  for  ETC                                                              
status. We told  them we would need to rule first  on whether they                                                              
were going  to be certificated to  offer service and then  look at                                                              
the ETC question, but yes, it's the Ketchikan application.                                                                      
                                                                                                                                
CHAIRMAN TAYLOR:  And if they are,  then they become part  of this                                                              
$75 million  pool that you will  have to certify for  federal pass                                                              
through on essential service or universal service, I mean.                                                                      
                                                                                                                                
CHAIRWOMAN  THOMPSON: If  by 'they,'  you mean  AP&T wireless,  if                                                              
they get  ETC status,  the answer  is yes. I  don't know  what the                                                              
universal service rate is in Ketchikan, but...                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR: I'm a little curious.                                                                                          
                                                                                                                                
SENATOR DONLEY: How are we doing on our CS?                                                                                     
                                                                                                                                
CHAIRMAN  TAYLOR:  We're  going  to  find out  here  in  a  couple                                                              
minutes, because I want to break and get out of here.                                                                           
                                                                                                                                
SENATOR  THERRIAULT: Did  you get  a  note or  anything on  caucus                                                              
whether it's just holding or?                                                                                                   
                                                                                                                                
CHAIRMAN TAYLOR: Not yet.                                                                                                       
                                                                                                                                
SENATOR DONLEY:  Because I  think I'm  at the  point where  I feel                                                              
that I'm ready to  mark up a bill and I had  my questions answered                                                              
about as good as I can unless I go  and spend months and months...                                                              
                                                                                                                                
SENATOR THERRIAULT:  Nan, could you...? I'd like to  - I know it's                                                              
going to be a trial wading through this, but I...                                                                               
                                                                                                                                
CHAIRWOMAN  THOMPSON: It's  not as  bad  as you  think. It's  well                                                              
written. It is.                                                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: Further questions?                                                                                             
                                                                                                                                
CHAIRWOMAN THOMPSON: Thank you.                                                                                                 
                                                                                                                                
CHAIRMAN TAYLOR: I'm disappointed on the e-mails.                                                                               
                                                                                                                                
CHAIRWOMAN  THOMPSON: I'd  be  happy to  address  those if  you're                                                              
interested.  After the hearing  that I  testified in Anchorage,  I                                                              
went back  to the office  and went through  my sent mailbox  and I                                                              
think that both  of the attorneys were sitting  there and watching                                                              
me do it. Then when the clarification  came about the trash, I was                                                              
already out of town and was unable  to do that remotely. So, I had                                                              
somebody  do it  here in  Anchorage,  but the  testimony was  that                                                              
there were e-mails about the mark  up language for the first bill,                                                              
the one that was during regular session.  I remember those as well                                                              
and I don't know why those e-mails  weren't retained by the system                                                              
in either my trash or my sent mailbox,  because I would agree with                                                              
what  Eric  Yould  said that  we  corresponded  electronically  on                                                              
those, but they're  not in the system. I guess the  best answer is                                                              
that my sent mail isn't storing everything.  I have no idea how it                                                              
picks stuff  up and I've  never really  bothered, to tell  you the                                                              
truth, to  figure out  - because I  don't use  my sent mail  or my                                                              
trash.                                                                                                                          
                                                                                                                                
CHAIRMAN  TAYLOR: They  are  in the  system.  Had I  known that  I                                                              
didn't have  them, I  would have had  a technician retrieve  them,                                                              
because you are part of the  - you  are connected. It can be done.                                                              
                                                                                                                                
CHAIRWOMAN  THOMPSON:  We're part  of  the  DCED server  and  they                                                              
maintain our back-ups as I understand it.                                                                                       
                                                                                                                                
CHAIRMAN  TAYLOR: Right  and we  could have  had that  had I  only                                                              
known that.                                                                                                                     
                                                                                                                                
CHAIRWOMAN THOMPSON:  I'm not trying  to be evasive. I  don't know                                                              
how they  maintain the  back-ups. So, I  don't really  know what's                                                              
available.                                                                                                                      
                                                                                                                                
CHAIRMAN TAYLOR:  I do. I was  anticipating it, but I  didn't have                                                              
an opportunity to exercise it, because  we're being forced through                                                              
this thing  with lightening speed  by the Governor who  wants this                                                              
thing addressed, and  the House wants it addressed,  and everybody                                                              
wants  to   go  home.  I  don't   have  anything  further.   I  am                                                              
disappointed   though.  Any  further   questions?  Okay,   we  are                                                              
recessed. Go get ourselves a CS and get started again.                                                                          

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