HOUSE BILL NO. 119 "An Act permitting grants to certain regulated public utilities for water quality enhancement projects and water supply and wastewater systems." REPRESENTATIVE JOHN COGHILL, SPONSOR spoke in support of the legislation. The legislation would permit grants to be offered to utilities that serve the pubic (municipally and privately owned). The intent is to encourage municipal development. Section 3 would allow public water and sewer utilities to be eligible for projects that are regulated by Regulatory Commission of Alaska. The question arises regarding whether those doing contract work or own a utility would be able to a make profit from the grants. He stated that they would not. He referenced a letter from the Department of Community and Economic Development, dated April 8, 2002, in member's packets. Grants would be for project expansion and would not be put into the asset base that would be later sold. The purchase price that the utility would be able to recover would be regulated. He stressed that the legislation seeks equity. The intent is not to allow public money to bolster up private corporations, but to give ratepayers relief and to grow Alaska through an expansion of utilities. Representative Coghill observed that the contributed capital for the utilities would be regulated. Regulated utilities would not be permitted to recover contributed capital from its costumers. It would account for the contributed capital in a manner that is identified and outlined in the rate base under the uniform system of accounts in the Regulatory Commission of Alaska. The bill contains many safeguards. He claimed that he was comfortable with the issue and requested approval and passage of the legislation. Co-Chair Harris asked how many private water and sewer utilities were in the state of Alaska. Representative Coghill stated that there were four sewer and 21 water related utilities. He noted that in Fairbanks, one company operates two different utilities. DAN GAVORA, EXECUTIVE VICE PRESIDENT, UTILITY SERVICES OF ALASKA testified via teleconference in support of the bill. He stated that as a result of the privatization process that Fairbanks ratepayers had lost this eligibility. The source of the funds that pay for the grants are collected from the taxes paid by both municipal and private owned utilities. He maintained that to discriminate against utilities, which shared equally in the burden, was unjust and that the bill would put Fairbanks ratepayers on an equal level with others in the state. He noted that there were 45 thousand residents in the state that are not given the same treatment as the remainder of the state. He noted that under Regulatory Commission of Alaska regulations all economic benefits of the grants are passed on to the ratepayers. Shareholders receive no benefit. He stated that the bill would reduce the burden to ratepayers, and to expand service. Representative Stoltze requested that the Regulatory Commission of Alaska testify at a future meeting. HB 119 was heard and HELD in Committee for further consideration.