Legislature(1993 - 1994)
02/08/1994 01:30 PM Senate L&C
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* first hearing in first committee of referral
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SENATE LABOR AND COMMERCE COMMITTEE
February 8, 1994
1:30 p.m.
MEMBERS PRESENT
Senator Tim Kelly, Chairman
Senator Steve Rieger, Vice-Chairman
Senator Bert Sharp
Senator Georgianna Lincoln
Senator Judy Salo
OTHERS PRESENT
Senator Dave Donley
COMMITTEE CALENDAR
SENATE BILL NO. 208
"An Act relating to the employment of certain state employees and
officers seeking election to state or national office."
SENATE BILL NO. 212
"An Act relating to publications produced by state agencies and to
the procurement of property, property interests, and services by
state agencies."
HOUSE BILL NO. 180 am
"An Act relating to the residential housing inspection requirements
of the Alaska Housing Finance Corporation."
SENATE BILL NO. 213
"An Act extending the Alaska Public Utilities Commission and the
regulatory cost charge."
PREVIOUS SENATE COMMITTEE ACTION
SB 208 - See Labor & Commerce minutes dated 2/3/94.
SB 212 - See Labor & Commerce minutes dated 11/17/93,
1/27/94, and 2/3/94.
HB 180 - See Community & Regional Affairs minutes dated
4/22/93 & 4/24/93. See Labor & Commerce minutes
dated 1/25/94.
SB 213 - See Labor & Commerce minutes dated 9/28/93.
WITNESS REGISTER
David Harding, Aide
Representative Eileen MacLean
State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Supported HB 180.
Don Schroer, Chairman
Alaska Public Utilities Commission
1016 W. 6th Ave., Suite 400
Anchorage, Alaska 99501-1963
POSITION STATEMENT: Supported SB 213.
David Hutchens, Director
Alaska Rural Electric Cooperative Association
703 West Tudor Road, Suite 200
Anchorage, Alaska 99503
POSITION STATEMENT: Supported SB 213.
Jack Rhyner
Alaska Telephone Association
2721 Abbott Road
Anchorage, Alaska 99507
POSITION STATEMENT: Supported SB 213.
Randy Welker, Legislative Auditor
Legislative Audit Division
P.O. Box 113300
Juneau, Alaska 99811-3300
POSITION STATEMENT: Supported SB 213.
ACTION NARRATIVE
TAPE 93-7, SIDE A
Number 001
CHAIRMAN TIM KELLY called the Labor and Commerce Committee meeting g
to order at 1:30 p.m.
SENATOR KELLY returned SB 208 (CANDIDATES MUST RESIGN STATE
EMPLOYMENT) and asked his Aide, JOSH FINK, to discuss the proposed
committee substitute, before additional comments from the sponsor,
SENATOR DONLEY.
MR. FINK explained the proposed committee substitute for SB 208
makes sure the Alaska Railroad is covered, since it is a separate
legal entity from the state, but he said there was some ambiguity
about the Alaska Housing Finance Corporation, so they were listed.
He described the search prepared by Legislative Counsel, which
found all were except the Alaska Railroad and some ambiguity with
AHFC.
MR. FINK reported two were specifically added to those entities
with separate legal existence and were checked to ensure their
employees, described as state employees in statute, were added to
the prohibition.
SENATOR DONLEY spoke in support of the committee substitute and
praised the search done by Legislative Counsel. He expressed some
concern at the inclusion of the lower range of employees, those
below a range 15, and asked if the committee wanted to consider
exempting these employees. After some discussion it was decided
not to allow the exemption for any employees.
SENATOR SHARP moved to adopt the new committee substitute for SB
208. Without objections, so ordered.
SENATOR SHARP moved to pass CS FOR SENATE BILL NO. 208(L&C)
(CANDIDATES MUST RESIGN STATE EMPLOYMENT) from committee with
individual recommendations. Without objections, so ordered.
SENATOR KELLY returned SB 212 (STATE PROCUREMENTS AND PUBLICATIONS)
to committee and asked his Aide, JOSH FINK, to explain the proposed
committee substitute for the bill.
MR. FINK explained the changes beginning on page 2, in the
FINDINGS, PURPOSE, AND INTENT on line 10, and he read the changes,
including the suggestion from SENATOR LINCOLN to include "resident"
businesses. On page 6, lines 16 and 17, MR. FINK described the
changes to satisfy the report the Commissioner for the Department
of Transportation has to submit on the pilot bonus program fifteen
and twenty seven months after the program is initiated. At SENATOR
LINCOLN'S request it was added to cover the geographical region
where the construction is to be performed, and a listing as to
whether the contractor is classified as a minority contractor.
Number 059
SENATOR LINCOLN directed attention to page 5, Section 8, INNOVATIVE
CONSTRUCTION PROCUREMENT METHODS PILOT PROGRAM, and noted the bonus
is an incentive throughout the life of the contract, while the
previous preference ends at the time of the bid.
MR. FINK explained the bidding process and the awarding of the
bonus on the contract award amount, making the incentive throughout
the entire life of the contract.
SENATOR LINCOLN continue to question the bonus and the timing of
the incentives, and she quoted MR. RASMUSSEN on the stronger
incentives at the end of a contract to hire more local people,
while being sure to use Alaskan products to qualify for the bonus.
Number 094
SENATOR SHARP moved to adopt the new committee substitute for
Senate Bill 212. SENATOR LINCOLN was assured her changes were
included. Without objections, so ordered.
SENATOR SHARP moved to pass the CS FOR SENATE BILL NO. 212(L&C)
(STATE PROCUREMENTS AND PUBLICATIONS) from committee with
individual recommendations and accompanying fiscal notes. Without
objections, so ordered.
SENATOR KELLY returned HB 180 (ALASKA HOUSING FINANCE CORPORATION
HOUSING INSPECTION REQUIREMENTS) to committee and asked DAVID
HARDING, Aide to REPRESENTATIVE EILEEN MACLEAN, to explain the
proposed committee substitute on HB 180.
Number 100
MR. HARDING explained the only change was on page 2, lines 17 and
18 with a definition of "rural area." He quoted the concerns of
the committee that the previous definition was too broad, so the
population cap of 5,500 was added.
SENATOR KELLY asked who it would cover. MR. HARDING said it would
not apply to communities with their own municipal codes, but would
change the designation for Ketchikan, Sitka, and possibly Bethel,
with the changes in their population number. SENATOR KELLY checked
to be sure of the designation of Juneau and Cordova.
SENATOR LINCOLN questioned whether the changes would eliminate
Minto, connected by road to Fairbanks, and she was told it would.
She listed Manley and all of the Ottna communities, but MR. HARDING
said the bill was not intended to catch people along the road
system. He explained the merger that precipitated the legislation,
and how it was being addressed in the legislation.
Number 149
SENATOR LINCOLN expressed her problem with a five hour trip to
Manley over a nearly impassable road, except in the winter time.
MR. HARDING said Manley was not covered in HB 180, and SENATOR
SHARP explained the road to Eagle was accessible during the summer
time, but not the winter. He wondered if the definition was going
to cause additional problems. There was a general discussion among
the committee members of the various communities that would or
would not be served by the legislation.
MR. HARDING reviewed the provisions of the proposed legislation to
provide for inspection in those areas not presently served by
municipal codes or reside on the highway system, where inspectors
can access the buildings, albeit on a substandard road.
SENATOR KELLY asked if any complaints had been received from Minto,
Manley, or Eagle, and MR. HARDING said not in the two years he had
been working on the bill. SENATOR LINCOLN asked for the next
committee of referral, and it was found to be the Rules Committee.
SENATOR KELLY decided to hold the legislation for another meeting
and asked SENATOR LINCOLN for language to address the problem, but
he suggested it might be difficult to narrow the definition any
further.
SENATOR SHARP said he was not interested in fixing any more of the
problems that were created when AHFC was merged with Alaska State
Housing by the Legislature.
MR. HARDING explained the definition for rural mirrors a part of
the definition of "small community" later on in the Chapter, which
he read: "A small community is defined as community under 1,400 on
the road system." He suggested a numbers fix was the only option
left to the legislators, but it might also allow communities on the
edge of Anchorage to benefit from the legislation.
Number 198
SENATOR KELLY again said the bill could be addressed before the
next meeting for any changes.
SENATOR KELLY introduced SB 213 (ALASKA PUBLIC UTILITIES COMMISSION
EXTENSION AND REGULATORY COST CHARGE) to committee and invited the
chairman of the commission, DON SCHROER, to testify on the Sunset
Hearing. SENATOR KELLY announced there would be a working session
at the conclusion of the testimony, to review proposed amendments,
and to work on a proposed committee substitute.
Number 204
MR. SCHROER read prepared remarks from a document, Sunset Hearing
Testimony , and excerpts have been included in the minutes.
MR. SCHROER began by expressing support for SB 213 and gave his
recommendation for several amendments to the bill.
In the General Commission Overview , MR. SCHROER read the A.P.U.C.
mission statement, and extended his comments to include elaboration
on certificates of public convenience and necessity, pipeline
carriers, rates, and terms of conditions of service to the public.
He described the membership, budget, and staff of the commission.
Under Legislative Recommendations , MR. SCHROER outlined those in a a
series beginning with A. Regulatory Cost Charge , in which he
suggested the regulatory cost charge should be made permanent,
rather than simply extending the repeal date by four years. He
explained the Commission's sunset review is adequate to address any
problems that might arise in the budget.
MR. SCHROER addressed concerns expressed by the utilities, and he
used the statute which directs the Commission, to answer the
concerns of over-collection. He said the Commission has proposed
language to ensure that over-collection of the Regulatory Cost
Charge Program (RCC) does not happen, as stated in Section 32 of
the Operating Budget, which recommends similar permanent language
in AS 42.05.253 and 42.06.285.
Number 248
Under B. Power Cost Equalization , MR. SCHROER reviewed the
responsibilities of the Commission for setting the electric rates
for PCE-eligible utilities, as well as SB 106, which would transfer
the power cost equalization responsibility to the Department of
Community and Regional Affairs. He referred to a drafting error
and explained a revisor's bill had been prepared to correct the
error.
On to C. Cable Television Regulation , MR. SCHROER explained the
Commission has received authority from the Federal Communications
Commission to regulate the basic tier of cable utilities currently
regulated by the Commission under state law. He also explained a
change in statutes would be needed to allow local governments to
regulate Cable TV.
MR. SCHROER said D. Pipeline Legislative Recommendations would be
described in the annual report.
Finally, in E. Commission procurement of expert witnesses , MR.
SCHROER quoted the Commission recommendations adding an exemption
to the Procurement Act, AS 36.30.850, to allow its expert witnesses
for cases in a timely manner, and he continued to explain why this
has not been previously possible.
Next, MR. SCHROER responded to the legislative changes suggested by
the Alaska Rural Electric Cooperative Association, beginning with
(1) Liberally Construed . He gave the only instance where this
phrase is found in AS 42.05.141 in the powers and duties section,
which he read to the committee. He quoted a case HEA vs. City of
Kenai in which the Supreme Court interpreted the meaning as the
actual area in which the A.P.U.C. may exercise its adjudicatory
authority as being quite narrow, but allows for broad specific
provisions within the narrow authority. He continued to explain
the guiding principles to determine the extent of the A.P.U.C.'S
jurisdiction to include limitations, restrictions, as well as a
principle of expansion.
MR. SCHROER reviewed the dealings with this phrase by the Alaska
Supreme Court, and in four of the cases the Court found the
Commission lacked authority. He described the scrutiny received on
this phrase and its authority.
Number 296
In (2) The second issue is Negotiated Rulemaking , MR. SCHROER
explained, under the Constitution, it cannot mean the delegation of
the rulemaking power of the Commission to another body, and he
further explained the negotiating group must be treated as a state
agency for the purposes of the open meetings and public records
act. He expressed concern the process would be slowed further and
suggested additional research on the subject.
In (3) Lower RCC rates for Electric Utilities , MR. SCHROER read the he
response to the Legislative Audit of March 1, 1993, and he quoted
the Commission as agreeing the program should be made permanent by
deleting the automatic repeal date for the RCC. He said the
Legislature switched the funding source for the Commission from
general funds to a regulatory assessment, and he explained the
Commission's work to assert compliance by affected entities, which
he claims is now running smoothly.
MR. SCHROER discussed the reasons the Commission could not support
the recommendation to require itemization of the rates under the
RCC program by utility/pipeline carrier type.
MR. SCHROER explained the individual RCC rates would require full
and direct allocation of the Commissioner's costs, but the
recommendation, if implemented as drafted, would increase the cost
of the RCC program. He also explained the burden this would place
on the Commission.
MR. SCHROER quoted the auditor's recommendation for future
refinement of the RCC would require the statutory cap of .61% of
the adjusted gross revenues to be substantially increased, and he
cited AS 42.05.253(a). If the RCC allocation was altered to
reflect the percent of time spent per utility type, he projected
the current authorized budget for the Commission would require an
increase of the cap to .85% for certain utility groups, which would
increase a bill for a utility customer to less than $20 per year.
Number 348
Next, MR. SCHROER reviewed III. A.P.U.C.'S Response to the
Recommendations of the Legislative Auditor in which the Alaska
Public Utilities Commission concurs with the Legislative auditor's
findings on public purpose and supports the extension of the sunset
date.
In A. Regulatory Cost Charge , MR. SCHROER quoted the Commission's
opposition to the required re-adjustment of the RCC on an industry
by industry basis and explained their response.
In B. Easier Access for Utility Consumers to Opt In or Out of
Regulations , MR. SCHROER indicated support for the cut-off from
$325 thousand to either $500 thousand or a million for economically
regulated electric utilities, which would mean that nine more
electrical utilities would be able to hold deregulation elections
including one local telephone company.
MR. SCHROER explained the Commission agreed the C. Timekeeping
System was worthwhile to pursue, but he suggested a fiscal note
would be required to carry out this recommendation.
In D. Commissioner's Access to Adequate Staff Support , MR. SCHROER R
explained why the Commission proposed to increase the staff support
available for Commissioners on regulatory policy issues, to be done
by upgrading one position and creating one new slot to serve as the
Commissioners' Policy Analyst.
In E. Stagger Commissioner's Terms , MR. SCHROER explained why the
Commission supported this statutory change. At this point, he
asked for questions.
SENATOR RIEGER questioned the different regulatory cost charges for
separate industries and asked what would happen if the A.P.U.C.
ever got into a big legal battle. They discussed a standard cost
spread across all the industries. MR. SCHROER described the
process of cost allocation, citing a provision in the present
statute and a PC adjustment.
Number 417
There being no more questions, SENATOR KELLY called on DAVE
HUTCHENS, Director of the Alaska Rural Electric Cooperative
Association, (ARECA) to testify.
SENATOR KELLY asked MR. SCHROER when the "liberally construed"
language passed the legislature, but MR. SCHROER didn't know.
MR. HUTCHENS explained the language became part of the A.P.U.C.
statute when it was recreated into its present form back in the
1970's, and it became a full time commission. SENATOR KELLY asked
MR. FINK to check on the precise time.
MR. HUTCHENS quoted his association as being in support of
continuing the A.P.U.C., and he cited the same reasons used when it
was created in its present form. From the perspective of ARECA,
MR. HUTCHENS discussed the value in the diversity of interest
between the consumers and the owners who regulate the rates to be
fair and reasonable. Another reason, MR. HUTCHENS thought still
valid is that electric utilities are very natural monopolies, which
can lead to territorial disputes, and someone should assign the
service areas.
MR. HUTCHENS described the resolution of the long standing dispute
between the Chugach Electric Association and the Municipality of
Anchorage over where each would serve. He explained this resolve
lead to the creation of the A.P.U.C. in its present form, and
through the years the A.P.U.C. has resolved territorial disputes.
Number 455
MR. HUTCHENS referred to a long standing dispute over service areas
overlapping between the Tlingit-Haida Regional Electrical Authority
and Alaska Power and Telephone in Southeast Alaska, and he gave
some of the particulars in the case. He discussed their exception
to a sentence about service areas not being exclusive, and whether
they should add some to the sunset review with proposed language to
correct a new problem.
MR. HUTCHENS explained they had become comfortable with the
adequacy of the present law, and he cited a long legislative
history to confirm that service areas for ARECA'S to be exclusive.
He mentioned it to renew the long history of the law, and he
submitted to the committee copies of a letter for the record from
Senators Duncan and Zharoff in that regard.
The second point to be discussed by MR. HUTCHENS was in relation to
the Legislative Audit booklet distributed to the committee members,
and he referred to Audit Recommendation #1 to provide a better
equity in the manner in which the regulatory cost charge is
allocated among the different kinds of utilities. He quoted the
specific recommendation for a method of allocating these charges
that sounded reasonable and equitable, but the Commission objected
as being too expensive to administer.
Since the ARECA pays the bills for APUC, MR. HUTCHENS said they
have to be sensitive to the costs as well, and he suggested what he
considered a simpler way of getting reasonable allocations among
the different kinds of utilities. He quoted a solution first
proposed by then REPRESENTATIVE BERT SHARP in the House Finance
Committee when RCC was originally adopted about three years ago.
MR. HUTCHENS explained basically the A.P.U.C. should subtract the
cost of power on electric utilities from their total revenues
before the allocation was determined, and he explained how the
formula could be accomplished with the present accounting system.
He claimed there was something wrong with the present formula, and
SENATOR SHARP'S plan would be a rough and ready kind of justice
that would fix the allocation problem, besides being easy to
administer.
Number 499
MR. HUTCHENS explained SENATOR SHARP'S proposal from three years
ago, saying it would recalculate the regulatory cost charge for
electric utility to approximately the same percentage of the work
load, or 28%.
SENATOR KELLY asked who loses if you assume a neutral revenue to
A.P.U.C. Someone would have to go up?
MR. HUTCHENS confirmed SENATOR KELLY was correct and explained
others would go up, particularly the telephone companies regulated
by the A.P.U.C. He said presently the auditor estimates the phone
company's share of the work load to be 45%, while they are paying
21% of the RCC. MR. HUTCHENS estimated it would only increase them
to 27%.
SENATOR KELLY asked what kind of money MR. HUTCHENS was discussing,
and MR. HUTCHENS said he had the results from work previously done
on the calculations last summer, but not with him. He suggested
SENATOR KELLY look in the current auditor's report for the RCC
recommendations for some numbers, and MR. HUTCHENS said the total
budget of the Commission is on the order of $3.5 million per year,
(He was corrected to $3.6 for this year from the audience.) and he
said the percentage would change for the utilities from 43% down to
28% of the $3.6 million dollars.
SENATOR LINCOLN asked again for the formula to subtract the cost of
the purchase of power ....
MR. HUTCHENS pointed out two lines on the reports which showed the
cost of purchase power, and the other the cost of generation. He
told her to subtract the two lines from the total revenues to get
the adjusted revenues for calculating the RCC.
MR. HUTCHENS launched into his second topic which was also related
to the regulatory cost charge, and he quoted Chairman SCHROER as
suggesting there should be language added to provide for a true-up
at the end of the fiscal year to carry surplus over into the
following year. He supported that recommendation for the A.P.U.C.
Next, MR. HUTCHENS referred to audit recommendation #4 for adequate
staff during dockets when the regular staff is not available to
them, and he thought professional staff for the Commission would be
appropriate. MR. HUTCHENS also supported the audit recommendation
for staggered terms.
MR. HUTCHENS said most important from the perspective of the ARECA
was the removal of the phrase "liberally construed" from statute
and replaced with a test that "the Commission shall have the powers
specifically conferred or necessarily implied."
TAPE 93-7, SIDE B
Number 001
MR. HUTCHENS said MR. SCHROER was correct when he said there hadn't
been many cases in the courts where the phrase has been used, but
he suggested there were other occasions where the Commission has
cited "liberally construed" as defensible authority to take actions
that did not result in lawsuits. He said the ARECA thinks the
phrase needs to be removed, so it is the Legislature making the
decision on the authority of the Commission, not the Commission or
the Courts.
MR. HUTCHENS said the chairman of the A.P.U.C. was correct that in
many cases where the phrase has been invoked, the utilities have
benefitted, but he still contends it should be the Legislature's
call, only. He gave as an example of the importance as the Healy
Clean Coal Project, and he said there was an effort to kill the
project by adding a new test by adding environmental externalities
into the calculation of feasibility. He said there was no
legislative history to suggest environmental externalities should
be included in the kind of a case before the A.P.U.C., and he
described how it had been turned down by only a 3 to 2 vote.
MR. HUTCHENS said the decision might still go the other way in the
Court, which is the basis for the appeal from the Commission's
order. He reiterated the Legislature should make the call on the
authority of the A.P.U.C.
SENATOR RIEGER recalled that ATA and Chugach Electric Association
came in for some intense oversight from the A.P.U.C., and asked MR.
HUTCHENS about the extent of A.P.U.C.'S involvement.
MR. HUTCHENS said a number of utilities had very intensive over-
sight by the Commission about ten years ago, Chugach Electric
Association, perhaps Alaska Telephone Utilities, and for sure, the
Alaska Village Cooperative. In answer to a question by SENATOR
RIEGER, MR. HUTCHENS thought it just came from their general
oversight powers.
SENATOR KELLY checked with the Anchorage Teleconference Network to
see if JACK RHYNER was still on the line.
MR. RHYNER, representing the Alaska Telephone Association, spoke in
support for the exemption to the procurement practices and also ask
for a waiver for the state hiring practices.
Number 055
MR. RHYNER explained some of the tremendous changes in technology
experienced by the telephone industry, and he wasn't sure the
Commission would have the ability to train their staff on a timely
basis for such specialized knowledge, while waiting on a list of
people to be hired within the State. He added their support for
the removal of the "liberally construed" language and generally
agreed with MR. HUTCHENS' testimony.
MR. RHYNER also agreed that jurisdiction should be within the
authority of the Legislature, and he also supported additional
staff for the Commissioners. He referred to a "white paper"
presented by the Alaska Telephone Association suggesting the
Commission and present staff be separated. He said they had deep
concerns about contact between the Commission and staff, with the
staff being a party to the docket which blurs the lines on ex parte
contact.
MR. RHYNER thought the Commission would need accounting and legal
staff of its own. He said they would agree with MR. SCHROER about
the allocation, and he explained it would amount to about $6.04 for
each person in the state for the utilities, but he didn't think
customers wanted to be faced with any more costs.
Number 098
SENATOR KELLY called on JIMMY JACKSON of GCI in Anchorage, but he
had no comments.
Next, SENATOR KELLY explained RANDY WELKER, the Legislative
Auditor, was available to answer questions from the committee.
SENATOR SHARP asked MR. WELKER about the sunset extension, and MR.
WELKER referred him to page 5 of the audit report recommending the
A.P.U.C. be extended ten years to year,2003, which he said was in
keeping with previous work in which the sunset cycle was changed to
spread the review process out over a longer review cycle than the
current four years.
MR. WELKER explained the A.P.U.C. has been one of the most audited
Commissions in the sunset process and continued to demonstrate a
public purpose and a need. He didn't think matters would change
enough to warrant an audit every four years but thought particular
circumstances could be handled by a special audit approach through
the Budget and Audit Committee.
SENATOR KELLY planned to hold the legislation for another time.
There being no further business to come before the committee, the
meeting was adjourned at 2:30 p.m. by SENATOR KELLY.
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