HCR 9-MATANUSKA ELECTRIC ASSN DEREGULATION CHAIR MURKOWSKI announced that the committee would consider HOUSE CONCURRENT RESOLUTION NO. 9, Encouraging the Matanuska Electric Association to reverse its plan to pursue deregulation. REPRESENTATIVE PETE KOTT, sponsor of HCR 9, presented the resolution. [Opening statements were inaudible due to tape failure. However, a written sponsor statement was provided in committee packets.] CHAIR MURKOWSKI asked Representative Kott if it is his intention to enforce the [Matanuska Electric Association] board's intent to lay this aside. REPRESENTATIVE KOTT responded that she was correct. He stated that he wants to reinforce the position that the board is currently taking, and he believes it should be put aside indefinitely. He added that this is not supported by the RCA (Regulatory Commission of Alaska). Number 0108 CHAIR MURKOWSKI stated that in the "resolved" clause on page 2, [the Alaska State Legislature] is encouraging MEA (Matanuska Electric Association) to reverse its deregulation plan. In view of the actions of the board, she asked Representative Kott if he feels this language is still appropriate. She remarked that it doesn't seem that [MEA] has a deregulation plan at this point. REPRESENTATIVE KOTT stated that it is questionable whether that plan currently exists. He said he suspects there was a formal plan that [MEA] was working from, but it has been put [aside] at the present time. Number 0190 REPRESENTATIVE ROKEBERG asked if, under the circumstances, Representative Kott thinks it is wise to go ahead, since [MEA] has set this issue aside. He stated that he finds a significant amount of the resolution objectionable in terms of its factual accuracy, and thinks it might "poison the well" of any future restructuring efforts the state might want to undertake. REPRESENTATIVE KOTT responded that he has given that a lot of thought, and he does not think there is anything that is not factual. REPRESENTATIVE ROKEBERG remarked that with issues of deregulation, it should say "restructuring," since the conclusions of the commission are premature. He stated that the fact that there was massive damage to certain economies due to deregulation is arguable. For example, California's [situation] was not caused by deregulation; he believes it was caused by legislative meddling in the market system. REPRESENTATIVE KOTT responded that he does not think [the blackouts that occurred in California] were entirely due to meddling by the California assembly, but that deregulation was not well thought out. REPRESENTATIVE ROKEBERG stated that he would suggest that California didn't have the restructuring or deregulation in the more traditional sense. It may have been labeled that way, but it was with price caps, and some very improper economic assumptions were made; as a result, California's system of alleged deregulation was doomed to failure from the "get-go." He stated that he doesn't think it is accurate to use that as an example, whereas the cases in Pennsylvania and the mid-Atlantic states have been quite positive. He asked Representative Kott what the form of deregulation was and if [MEA] was considering some kind of acquisition or merger. REPRESENTATIVE KOTT responded that he believes [MEA] was trying to get out from under control of the RCA. REPRESENTATIVE ROKEBERG remarked that it is a statutory provision that the legislature has provided for. Number 0449 TUCKERMAN BABCOCK, Manager, Government and Strategic Affairs, Matanuska Electric Association, testified via teleconference. He stated that it sounds as if there is some misunderstanding of what MEA has offered to its membership as a choice. He explained that it was already provided for in state statute, which is a deregulation with respect to setting rates and setting service rules. He stated that even if the membership had voted to approve this form of deregulation, the service territory and the certificate that allows [MEA] to serve a particular area would still be regulated by the RCA. He remarked that had [MEA] pursued it, [MEA] would be doing nothing different from 65 percent of all the electric utilities in Alaska, which are already deregulated. These sorts of elections have been successfully held by Copper Valley, Cordova, and Kotzebue, all in the last few years. On the other hand, he said, the MEA board of directors, particularly with the confusion around the word "deregulation," and with the news about California back in January, voted unanimously not to initiate the deregulation election. He stated that if the legislature has considered the state statute that gives cooperatives this option and wishes to recommend to the co-ops not to pursue this option, then it makes no more sense to direct it at MEA than it would at Chugach, Golden Valley, or Homer at this point. Number 0637 CHAIR MURKOWSKI stated that she had asked the sponsor about the wording in the "resolved" section encouraging MEA to reverse its deregulation plan, and asked Mr. Babcock if, in his opinion, that has been accomplished by the recent actions. MR. BABCOCK responded that in January, MEA's board voted unanimously not to initiate the election. He stated that there are no plans to pursue this option or present it to the members. Even if the board wanted to pursue this limited kind of deregulation, a majority of the members would have to vote in favor of it before it would be implemented. REPRESENTATIVE ROKEBERG asked if the sponsor is going to redraft this. REPRESENTATIVE KOTT stated that he would. [HCR 9 was held over.]