HOUSE LABOR AND COMMERCE STANDING COMMITTEE April 13, 1993 3:00 p.m. MEMBERS PRESENT Rep. Bill Hudson, Chairman Rep. Joe Green, Vice Chairman Rep. Brian Porter Rep. Bill Williams Rep. Eldon Mulder Rep. Jerry Mackie Rep. Joe Sitton MEMBERS ABSENT None COMMITTEE CALENDAR HB 50: "An Act authorizing the Anchorage to Kenai Peninsula and the Healy to Fairbanks power transmission interties and approving the design and construction costs of the interties; and providing for an effective date." PASSED OUT OF COMMITTEE HB 51: "An Act making a special appropriation for design and construction of power transmission interties between Anchorage and the Kenai Peninsula and between Healy and Fairbanks; and providing for an effective date." PASSED OUT OF COMMITTEE *HB 279: "An Act extending the termination date of the Alaska Public Utilities Commission to June 30, 1997." PASSED OUT OF COMMITTEE SB 86: "An Act relating to funds transfers under the Uniform Commercial Code; changing Alaska Rule of Civil Procedure 82; and providing for an effective date." PASSED OUT OF COMMITTEE SB 112: "An Act relating to the Uniform Commercial Code; amending Alaska Rules of Civil Procedure 8 and 82, and Alaska Rule of Evidence 402; and providing for an effective date." PASSED OUT OF COMMITTEE SB 149: "An Act revising the laws governing financial institutions and relating to trust companies, the Alaska Small Loans Act, and the Premium Financing Act; amending Alaska Rule of Criminal Procedure 17 and Alaska Rule of Civil Procedure 45(b); and providing for an effective date." PASSED OUT OF COMMITTEE (* first public hearing) WITNESS REGISTER REP. RAMONA BARNES Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-3438 Position Statement: Supported HB 50 and HB 51 MIKE KELLEY Golden Valley Electric Association 758 Illinois Fairbanks, Alaska 99706 Position Statement: Supported HB 50 and HB 51 CLAYTON HURLISS Copper Valley Electric P.O. Box 45 Glennallen, Alaska 99588 822-3211 Position Statement: Supported HB 50 and HB 51 SENATOR ROBIN TAYLOR Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-3873 Position Statement: Supported HB 50 and HB 51 THOMAS STEVENSON Ketchikan Public Utilities City of Ketchikan Ketchikan, Alaska 99901 225-1000, ext 377 Position Statement: Supported HB 50 and HB 51 DON SCHROER, Chairman Alaska Public Utilities Commission 1016 W. 6th, Ste. 400 Anchorage, Alaska 99501-1963 276-6222 Position Statement: Supported HB 279 DAVE HUTCHINS Alaska Rural Electric Cooperative Association 703 W. Tudor, #200 Anchorage, Alaska 99503 561-6103 Position Statement: Supported 279 BOB LOHR, Executive Director Alaska Public Utilities Commission 1016 W. 6th, Suite 400 Anchorage, Alaska 99501-1963 276-6222 Position Statement: Supported HB 279 BILL KELDER, Staff Senator Jay Kertulla Alaska State Legislature State Capitol Juneau, Alaska 99801-1182 465-6600 Position Statement: Read sponsor statement on SB 86 and SB 112 ART PETERSON, Staff Attorney Offices of Dillon and Findley One Sealaska Plaza, Suite 202 Juneau, Alaska 99801 586-4000 Position Statement: Supported SB 86 and SB 112 WILLIS KIRKPATRICK, Director Division of Banking and Securities P.O. Box 110807 Juneau, Alaska 99811-0807 465-2521 Position Statement: Supported SB 86 and SB 112 MICHAEL BURNS, President Key Bank 101 W. Benson Anchorage, Alaska 99503 564-0250 Position Statement: Supported SB 149 RICHARD HARDCASTLE Private Insurance Company 100 Main Street Ketchikan, Alaska 99901 225-2176 Position Statement: Opposed SB 149 ALLAN SHATTUCK Shattuck and Grummett Insurance 301 Seward St. Juneau, Alaska 99503 586-2414 Position Statement: Opposed SB 149 HOWARD JAEGAR, Vice President Shattuck and Grummett 301 Seward St. Juneau, Alaska 99503 586-2414 Position Statement: Opposed SB 149 KAREN HOFSTAD Petersburg Insurance Company P.O. Box 203 Petersburg, Alaska 99833 772-3858 Position Statement: Opposed SB 149 SUSAN ERICKSON P.O. Box 53 Petersburg, Alaska 99833 772-9237 Position Statement: Opposed SB 149 JIM SARVELA First Bank P.O. Box 7920 Ketchikan, Alaska 99901 228-4219 Position Statement: Opposed SB 149 JACK DAVIES 100 Main St. Ketchikan, Alaska 99901 225-2176 Position Statement: Opposed SB 149 CRAIG INGHAM McKinley Bank P.O. Box 73880 Fairbanks, Alaska 99707 452-1751 Position Statement: Supported SB 149 GORDON DEPUE P.O. Box 70531 Fairbanks, Alaska 99707 452-6891 Position Statement: Opposed SB 149 GARY ROTH Denali Bank 119 N. Cushman Fairbanks, Alaska 99701 456-1400 Position Statement: Opposed SB 149 JOHN SWEENEY 508 Marine Way Kodiak, Alaska 99615 486-3101 Position Statement: Opposed SB 149 DAVID STRATTON Life Underwriter 8300 Briarwood, Suite B Anchorage, Alaska 99518 522-1194 Position Statement: Opposed SB 149 KEITH SILVER Alaska State Insurance 505 W. Northern Lights, #216 Anchorage, Alaska 99503 272-4445 Position Statement: Opposed SB 149 JOHN GEORGE, Lobbyist 9515 Moraine Way Juneau, Alaska 99801 789-0172 Position Statement: Opposed SB 149 PREVIOUS ACTION BILL: HB 50 SHORT TITLE: AUTHORIZING POWER TRANSMISSION INTERTIES BILL VERSION: SPONSOR(S): REPRESENTATIVE(S)NAVARRE,Carney,Brice,Sitton, Menard,Davies TITLE: "An Act authorizing the Anchorage to Kenai Peninsula and the Healy to Fairbanks power transmission interties and approving the design and construction costs of the interties; and providing for an effective date." JRN-DATE JRN-PG ACTION 01/14/93 58 (H) READ THE FIRST TIME/REFERRAL(S) 01/14/93 59 (H) LABOR & COMMERCE, FINANCE 02/11/93 (H) L&C AT 03:00 PM CAPITOL 17 02/11/93 (H) MINUTE(L&C) 02/15/93 350 (H) COSPONSOR(S): GREEN 04/08/93 (H) L&C AT 03:00 PM CAPITOL 17 04/08/93 (H) MINUTE(L&C) 04/13/93 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 51 SHORT TITLE: APPROP: POWER TRANSMISSION INTERTIES BILL VERSION: SPONSOR(S): REPRESENTATIVE(S) NAVARRE,Carney,Brice, Sitton,Menard,Davies TITLE: "An Act making a special appropriation for design and construction of power transmission interties between Anchorage and the Kenai Peninsula and between Healy and Fairbanks; and providing for an effective date." JRN-DATE JRN-PG ACTION 01/14/93 59 (H) READ THE FIRST TIME/REFERRAL(S) 01/14/93 59 (H) LABOR & COMMERCE, FINANCE 02/11/93 (H) L&C AT 03:00 PM CAPITOL 17 02/11/93 (H) MINUTE(L&C) 02/15/93 351 (H) COSPONSOR(S): GREEN 04/08/93 (H) L&C AT 03:00 PM CAPITOL 17 04/08/93 (H) MINUTE(L&C) 04/13/93 (H) L&C AT 03:00 PM CAPITOL 17 BILL: HB 279 SHORT TITLE: EXTEND ALASKA PUBLIC UTILITIES COMMISSION BILL VERSION: SPONSOR(S): LABOR & COMMERCE TITLE: "An Act extending the termination date of the Alaska Public Utilities Commission to June 30, 1994." JRN-DATE JRN-PG ACTION 04/08/93 1110 (H) READ THE FIRST TIME/REFERRAL(S) 04/08/93 1110 (H) LABOR & COMMERCE 04/13/93 (H) L&C AT 03:00 PM CAPITOL 17 BILL: SB 86 SHORT TITLE: FUND TRANSFERS UNDER THE UCC BILL VERSION: SPONSOR(S): SENATOR(S) KERTTULA TITLE: "An Act relating to funds transfers under the Uniform Commercial Code; changing Alaska Rule of Civil Procedure 82; and providing for an effective date." JRN-DATE JRN-PG ACTION 02/03/93 220 (S) READ THE FIRST TIME/REFERRAL(S) 02/03/93 221 (S) LABOR & COMMERCE, JUDICIARY 03/02/93 (S) L&C AT 01:30 PM FAHRENKAMP ROOM 203 03/02/93 (S) MINUTE(L&C) 03/03/93 588 (S) L&C RPT 1DP 2NR 03/03/93 588 (S) ZERO FISCAL NOTES (DCED, LAW) 03/12/93 (S) JUD AT 01:30 PM BELTZ ROOM 211 03/15/93 (S) JUD AT 01:30 PM BELTZ ROOM 211 03/19/93 (S) JUD AT 01:30 PM BELTZ ROOM 211 03/22/93 896 (S) JUD RPT 4NR 03/22/93 896 (S) PREVIOUS ZERO FNS (DCED, LAW) 03/31/93 (H) MINUTE(ECO) 04/02/93 1063 (S) RULES 3CAL 1NR 4/2/93 04/02/93 1069 (S) READ THE SECOND TIME 04/02/93 1069 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/02/93 1069 (S) READ THE THIRD TIME SB 86 04/02/93 1070 (S) PASSED Y20 N- 04/02/93 1070 (S) EFFECTIVE DATE VOTE SAME AS PASSAGE 04/02/93 1070 (S) COURT RULE CHANGE VOTE SAME AS PASSAGE 04/02/93 1080 (S) TRANSMITTED TO (H) 04/02/93 954 (H) READ THE FIRST TIME/REFERRAL(S) 04/02/93 954 (H) LABOR & COMMERCE, JUDICIARY 04/13/93 (H) L&C AT 03:00 PM CAPITOL 17 BILL: SB 112 SHORT TITLE: UNIFORM COMMERCIAL CODE REVISIONS BILL VERSION: CSSB 112(JUD) SPONSOR(S): SENATOR(S) KERTTULA TITLE: "An Act relating to the Uniform Commercial Code; amending Alaska Rules of Civil Procedure 8 and 82, and Alaska Rule of Evidence 402; and providing for an effective date." JRN-DATE JRN-PG ACTION 02/11/93 338 (S) READ THE FIRST TIME/REFERRAL(S) 02/11/93 338 (S) LABOR & COMMERCE, JUDICIARY, FINANCE 03/02/93 (S) L&C AT 01:30 PM FAHRENKAMP ROOM 203 03/02/93 (S) MINUTE(L&C) 03/04/93 (S) L&C AT 01:30 PM FAHRENKAMP ROOM 203 03/05/93 613 (S) L&C RPT CS 1DP 3NR SAME TITLE 03/05/93 613 (S) ZERO FISCAL NOTES TO SB & CS (DCED, LAW) 03/19/93 (S) JUD AT 01:30 PM BELTZ ROOM 211 03/22/93 897 (S) JUD RPT CS 4NR SAME TITLE 03/22/93 897 (S) ZERO FISCAL NOTE TO L&C & JUD CS (DNR) 03/22/93 897 (S) PREVIOUS ZERO FNS APPLY TO CS (DCED,LAW) 03/22/93 (S) FIN AT 09:00 AM SENATE FIN 518 03/23/93 911 (S) FIN RPT 3DP 4NR (JUD)CS SAME TITLE 03/23/93 911 (S) PREVIOUS ZERO FNS APPLY (DCED, LAW, DNR) 03/23/93 (S) FIN AT 09:00 AM SENATE FIN 518 03/31/93 1004 (S) RULES RPT 3CAL 1NR 3/31/93 03/31/93 1008 (S) READ THE SECOND TIME 03/31/93 1008 (S) JUD CS ADOPTED UNAN CONSENT 03/31/93 1008 (S) THIRD READING 4/1 CALENDAR 03/31/93 (H) MINUTE(ECO) 04/01/93 1032 (S) READ THE THIRD TIME CSSB 112(JUD) 04/01/93 1033 (S) PASSED Y20 N- 04/01/93 1033 (S) COURT RULE CHANGES VOTE SAME AS PASSAGE 04/01/93 1033 (S) EFFECTIVE DATE CLAUSES SAME AS PASSAGE 04/01/93 1033 (S) KELLY NOTICE OF RECONSIDERATION 04/02/93 1079 (S) RECONSIDERATION NOT TAKEN UP 04/02/93 1080 (S) TRANSMITTED TO (H) 04/02/93 954 (H) READ THE FIRST TIME/REFERRAL(S) 04/02/93 955 (H) LABOR & COMMERCE, JUDICIARY 04/13/93 (H) L&C AT 03:00 PM CAPITOL 17 BILL: SB 149 SHORT TITLE: REVISION OF BANKING CODE BILL VERSION: CSSB 149(FIN) SPONSOR(S): LABOR & COMMERCE TITLE: "An Act revising the laws governing financial institutions and relating to trust companies, the Alaska Small Loans Act, and the Premium Financing Act; amending Alaska Rule of Criminal Procedure 17 and Alaska Rule of Civil Procedure 45(b); and providing for an effective date." JRN-DATE JRN-PG ACTION 03/05/93 616 (S) READ THE FIRST TIME/REFERRAL(S) 03/05/93 616 (S) JUDICIARY, FINANCE 03/19/93 (S) JUD AT 01:30 PM BELTZ ROOM 211 03/22/93 (S) FIN AT 09:00 AM SENATE FIN 518 03/22/93 898 (S) JUD RPT 1DP 2NR 03/22/93 898 (S) ZERO FISCAL NOTE (DCED) 03/23/93 (S) FIN AT 09:00 AM SENATE FIN 518 03/23/93 911 (S) FIN RPT CS 5DP 2NR SAME TITLE 03/23/93 911 (S) PREVIOUS ZERO FN (DCED) 03/31/93 1004 (S) RULES 3CAL 1NR 3/31/93 03/31/93 1007 (S) READ THE SECOND TIME 03/31/93 1007 (S) FIN CS ADOPTED UNAN CONSENT 03/31/93 1008 (S) ADVANCE TO 3RD RDG FAILED Y12 N8 03/31/93 1008 (S) THIRD READING 4/1 CALENDAR 04/01/93 1031 (S) READ THE THIRD TIME CSSB 149(FIN) 04/01/93 1032 (S) PASSED Y18 N2 04/01/93 1032 (S) COURT RULE CHANGE VOTE SAME AS PASSAGE 04/01/93 1032 (S) EFFECTIVE DATE VOTE SAME AS PASSAGE 04/01/93 1032 (S) ADAMS NOTICE OF RECONSIDERATION 04/02/93 1079 (S) RECONSIDERATION NOT TAKEN UP 04/02/93 1081 (S) TRANSMITTED TO (H) 04/02/93 955 (H) READ THE FIRST TIME/REFERRAL(S) 04/02/93 955 (H) LABOR & COMMERCE, JUDICIARY 04/13/93 (H) L&C AT 03:00 PM CAPITOL 17 ACTION NARRATIVE TAPE 93-37, SIDE A Number 001 CHAIRMAN HUDSON convened the House Labor and Commerce Committee at 3:10. Members present were Reps. Hudson, Green, Porter, Williams, Mulder, Sitton and Mackie. HB 50 AUTHORIZING POWER TRANSMISSION INTERTIES HB 51 APPROP: POWER TRANSMISSION INTERTIES REPRESENTATIVE RAMONA BARNES, SPEAKER OF THE HOUSE, spoke on behalf of HB 50 and HB 51 and gave the following summary of the history of the energy fund: "In 1981, SB 25 and 26 created the energy plan for Alaska. This plan included the 4 Dam Pool, Power Cost Equalization and a clause that was known as the blackmail clause. This clause in essence said that the grants that were given to the 4 Dam Pool would be paid back to the state, plus interest, if by the year 1991 there was less than $1 billion to construct Susitna/Watana Dam and an intertie system for the railbelt. "In 1984, the representatives of the 4 Dam Pool came back to Juneau seeking to have the blackmail clause removed from the statutes due to cost overruns that would require additional funds. Their claim was that unless the state gave them another outlay of cash they would not be able to bond at a favorable rate due to the existence of the blackmail clause in statute. "The Railbelt then gave up the blackmail clause with the understanding that in exchange there would be $200 million per year appropriated in the same manner as the Senior Citizens Longevity Bonus, as an example. In addition to that appropriation, there was to be $100 million deposited into the Bradley Lake Dam account. At that time, we also increased the per kilowatt amount to be subsidized by Power Cost Equalization. "This then, became law. Although this continuing appropriation was no different from any other that is required annually, the environmental community took it to court and a ruling was made that one legislature could not bind another, even though it was no different than numerous other annual appropriations. That first $200 million plus the $100 million for Bradley Lake Dam were the only funds ever deposited into the energy account. "In 1990, a deal was cut to raid the fund, and approximately $123 million was spent on various capital projects, very few of which had anything to do with energy. There is currently $123 million in an intertie reserve account. These two bills contain funding for a Northern and Southern intertie at $55 million for one and $40 million for the other, which only pays for 1/2 of each project. The utilities themselves would bond for the other half of the money. "We must look to the needs of the whole state. HB 50 and 51 contain not only the Northern and Southern interties, but funding for Tyee, Swan Lake, and Sutton to Glennallen. "There is a portion of the bill that has an ongoing appropriation of $800,000 to the Alaska Energy Authority. The Speaker suggests that the Alaska Energy Authority has outlived its usefulness, and that when the bills finally get to the floor, that the appropriation to the AEA be deleted and the money to go directly to the utilities involved." Number 190 SPEAKER BARNES also suggested that Power Cost Equalization be addressed under the Department of Community and Regional Affairs. The Speaker believed that the Department of Community and Regional Affairs better knows the needs of rural Alaska and that the money saved by not funding the energy authority could be used by the rural communities. Number 210 MIKE KELLEY, GENERAL MANAGER, GOLDEN VALLEY ELECTRIC ASSOCIATION, testified that the previous speaker gave an excellent history of the railbelt fund. MR. KELLEY asked that the committee pass HB 50 and HB 51 out to Finance to be fine-tuned and eventually passed into law. Number 222 CLAYTON HURLISS, GENERAL MANAGER, COPPER VALLEY ELECTRIC, stated that his organization was very pleased that these bills were going forward and would work together with the members of the legislature to make sure these bills go through in the best form possible. MR. HURLISS stated that his group was concerned about the order of priorities. Mr. Hurliss said that projects ought to be considered and funded on the basis of whether they are ready and to go and if there is enough time to build them. Number 240 REP. MACKIE asked Speaker Barnes if she had problems with Tyee and Swan Lake being in the bill. SPEAKER BARNES responded that she supports Tyee and Swan Lake, as well as the Sutton to Glennallen interties. Number 250 REP. MACKIE stated that the legislature should look at these projects with a statewide prospective, which also includes Power Cost Equalization. Number 264 REP. PORTER stated that he would be supportive of moving the bills out of committee. Number 285 SPEAKER BARNES asked the record to reflect that it is true that one legislature cannot bind the next and that there are many new people in the legislature, but that she has been in the legislature all the years referred to above. Speaker Barnes added that the agreements she made in previous years that relate to the energy package before this committee has borne out her support for Power Cost Equalization. Number 295 REP. GREEN inquired about the funding sources for these projects. SPEAKER BARNES responded that each of the interties will be bonded separately. Number 324 SPEAKER BARNES stated that the difference between HB 50 and HB 51 and the proposal the Alaska Energy Authority came up with is that their bill would have used all the Railbelt energy money. Number 350 REP. MACKIE clarified his position on this issue. Rep. Mackie stated that it was his view that Power Cost Equalization not be tinkered with and that the energy needs of Southeast Alaska be included in the statewide perspective of this bill. Number 368 SENATOR ROBIN TAYLOR echoed Speaker Barnes' comments and added that these bills are the culmination of a lengthy and arduous process over many years. Sen. Taylor believes that we are now in a place where we can put our differences aside and put forth a bill that would put some good projects on line. SEN. TAYLOR stated he believes the state will eventually be relieved of the burden of Power Cost Equalization when all these projects come on line. Number 408 THOMAS STEVENSON, MANAGER, KETCHIKAN PUBLIC UTILITIES, testified that HB 50 and HB 51 are necessary ingredients for the economic development of the state. Number 429 REP. MACKIE moved HB 50 and HB 51 with individual recommendations. No objections were heard; it was so ordered. Number 449 HB 279 EXTEND ALASKA PUBLIC UTILITIES COMMISSION DON SCHROER, ALASKA PUBLIC UTILITIES COMMISSION (APUC), stated that the APUC is due to end on June 30, 1993, at which time they would go into a wind down year. He said HB 279 would extend the commission for four years. MR. SCHROER stated that there is a Senate bill that would only extend the commission for one year, but it was his feeling that it would save costs and resources to extend four years and forego another legislative audit within a year. REP. MULDER asked if he had understood that the reason there was a proposal to sunset every year was that the commission was taken off of the state payroll and funded through program receipts, which would mean that the legislature lost fiscal oversight. REP. MULDER asked Mr. Schroer how he thought the commission had worked under this new funding scenario. MR. SCHROER answered that the budget APUC requested this year was slightly less than the one requested last year, and added that the commission was still part of the overall budget process and can't arbitrarily spend money or raise salaries. Number 525 DAVE HUTCHINS, EXECUTIVE DIRECTOR, ALASKA RURAL ELECTRIC COOPERATIVE ASSOCIATION, testified that they are in support of extending the APUC. Mr. Hutchins noted, however, that since the legislative budget and audit report came in late, the commission should only be extended for one year to give the legislature a chance to take a look at the report and its recommendations. Number 572 BOB LOHR, EXECUTIVE DIRECTOR, APUC, testified that not only is the APUC accountable to the legislature, but they are also accountable to the customers of the utilities. Number 595 REP. MACKIE moved am 1 to shorten the sunset date from 4 years to one year. TAPE 93-37, SIDE B Number 001 REP. PORTER objected. A roll call vote was taken with Rep. Porter voting against the amendment; Reps. Mulder, Williams, Green, Mackie, Sitton and Hudson voting for it. Amendment 1 passed. Number 037 REP. MULDER moved HB 279 and amended with individual recommendations and fiscal note. No objections were heard; it was so ordered. Number 085 SB 86 FUND TRANSFERS UNDER THE UCC SB 112 UNIFORM COMMERCIAL CODE REVISIONS BILL KELDER, STAFF, SEN. JAY KERTTULA, testified in support of SB 86. Mr. Kelder read a sponsor statement on Sen. Kertulla's behalf. Mr. Kelder stated that SB 86 is known as the "funds transfer bill" and generally speaking brings the funds transfer portion of Alaska's uniform commercial code up to date with regard to current electronic technology as it applies to modern business practices. Number 100 MR. KELDER added that SB 112 makes amendments to Alaska's Uniform Commercial Code, and in most instances these changes are designed to bring the code up to date with the rest of the country. Number 220 ART PETERSON, STAFF ATTORNEY, DILLON AND FINDLEY, private law offices and a Uniform Law Commissioner for Alaska, said he supports SB 86 and SB 112. Mr. Peterson echoed Mr. Kelder's remarks and pointed out two significant things in the bills: 1) it recognizes that modern technology plays a major part in today's business and; 2) doing business that way raises questions that these bills will provide answers for. Number 300 REP. PORTER moved SB 86 with individual recommendations and fiscal note. No objections were heard; it was so ordered. REP. GREEN moved SB 112 with individual recommendations and fiscal note. No objections were heard; it was so ordered. Number 415 SB 149 REVISION OF BANKING CODE WILLIS KIRKPATRICK, DIRECTOR, DIVISION OF BANKING, testified in support of SB 149. Mr. Kirkpatrick stated that the current Alaska Banking Code was critically obsolete. The existing code was taken from Oregon law at the time of Alaska statehood and has had only minor revisions since then. The Division of Banking, Securities, and Corporations has for the past few years been working to identify areas where changes in the code are needed. These changes fall into three basic categories: 1) obsolescence concerning today's financial institution marketplace; 2) obsolescence in addressing problems or failing banks; and 3) the need for a banking law that could provide additional economic development opportunities. MR. KIRKPATRICK went on to explain these changes in detail. (the details are in a position paper in the committee files) Number 560 MICHAEL BURNS, PRESIDENT, KEY BANK, testified in support of SB 149. Mr. Burns spoke specifically on the section of the bill which would allow the banking industry to sell insurance. Mr. Burns stated that this section would allow the banking industry to compete much the same as Allstate, the insurance company, competes with the banks in providing loans. Mr. Burns stated that he didn't see any reason that banks should be prohibited from competing in the insurance market. MR. BURNS stated that the committee would hear the argument that banks could be in the position of exerting undue influence on loan applicants to purchase insurance from them, but Mr. Burns believes this argument is wrong as the bill contains anti-tie-in clauses that would prohibit this. REP. MACKIE questioned how the banking industry expected small independent insurers to stay in business with the banking industry competing. TAPE 93-38, SIDE A Number 001 MR. BURNS replied that the market place would take care of itself. If the banking industry doesn't provide a better product, then the insurance agency will get the business. Number 005 RICHARD HARDCASTLE, PRESIDENT, HARDCASTLE/DAVIES INSURERS OF KETCHIKAN, testified against the section of SB 149 that would allow banks to sell insurance. Mr. Hardcastle said he believes allowing banks to sell insurance was unfair competition and pointed out two of the more important reasons: 1) large capitalized institutions have a tremendous number of captive prospects in their existing files can use their influence to sell them insurance; and 2) loan applicants would feel obligated to buy insurance from banks in order to get the loan. Number 020 MR. HARDCASTLE stated that the banking industry suggests that the anti-tie-in provisions in law would prevent any problems, but as a practical matter they just don't work. Number 025 MR. HARDCASTLE suggested the committee delete the section of the bill allowing banks in the insurance business and pass the bill out. Number 050 ALAN SHATTUCK, PRESIDENT, SHATTUCK AND GRUMMET INSURANCE, spoke against sections 2, 4 and 5. Mr. Shattuck said he believes these sections take too much of the legislative oversight away and put it into regulations. MR. SHATTUCK dittoed Mr. Hardcastle's remark that anti-tie- in laws do not work well. Number 073 HOWARD JAEGAR, VICE PRESIDENT, SHATTUCK AND GRUMMETT, AND PRESIDENT OF ALASKA INDEPENDENT INSURANCE AGENTS AND BROKERS, stated that his group was against allowing banks to sell insurance. Mr. Jaegar added that allowing banks to sell insurance was in direct conflict to the very businesses they hold deposits for or lend money to. MR. JAEGAR stated that allowing large banking organizations to compete with local merchants. Because banks control the extension of needed credit, they have unlimited access and there would be a temptation to exert coercion to sell other products. Number 158 REP. MACKIE stated that it was his belief that small insurers would be hurt and he therefore moved to delete page 24, line 18, of section 47. Number 230 REP. PORTER objected and expressed his concern that he didn't have enough information yet and he would like to hear from the other persons waiting on teleconference. Number 257 REP. GREEN added that he wanted further information of sections 4 and 5 of the bill. Number 280 KAREN HOFSTAD, INDEPENDENT INSURER, testified from Petersburg and noted that she had sold insurance in another state that allowed banks to sell insurance and she saw that it caused a lot of conflict and abuse. Ms. Hofstad stated that when banks loan money and provide insurance, there is a subtle indication that the person or business should buy from the bank. MS. HOFSTAD suggested the committee delete sections 2, 4 and 5 from the bill. Number 305 SUSAN ERICKSON testified from Petersburg and echoed Ms. Hofstad's comments. Number 310 JIM SARVELA, CHIEF FINANCIAL OFFICER, 1ST BANK, testified from Ketchikan that his concern was that banks be on an equal playing field with other institutions. Mr. Sarvella pointed out that the other institutions that primarily sell insurance also make loans. This bill would give all the participants equal opportunities in the marketplace. Number 330 JACK DAVIES, HARDCASTLE AND DAVIES INSURANCE, stated the impact of section 2 is anti-consumer. Mr. Davies added that as far as he knew there was never a consumer coming before asking that banks be allowed to sell insurance. Number 343 CRAIG INGHAM, PRESIDENT OF MT. MCKINLEY BANK, noted that currently Allstate, State Farm, etc., are involved in the credit side of the equation in offering loans. Mr. Ingham further stated that the banks would create a separate corporation or subsidiary to sell this insurance, which would alleviate any undue pressure a borrower might feel. Number 368 GORDON DEPUE urged deletion of section 2 of the bill. Mr. Depue said he does not believe that anti-tie-in provisions would prohibit the banks from pressuring customers to buy insurance on property they are borrowing from them for. Number 374 GARY ROTH, PRESIDENT, DENALI STATE BANK, testified that SB 149 should pass as is. Mr. Roth said he believed that this was a turf war and that compromise was not possible. Number 416 JOHN SWEENEY echoed comments above against section 2 of the bill. Number 431 DAVID STRATTON, PRESIDENT, ALASKA LIFE UNDERWRITER, stated that section 2 must be deleted. Mr. Stratton quoted Senator Murkowski as being against banks getting into the insurance industry. Number 451 KEITH SILVER stated that he supports the removal of section 2 of SB 149. Mr. Silver dittoed the remarks of Mr. Stratton and the others. Number 460 JOHN GEORGE, REPRESENTING THE AMERICAN COUNCIL OF LIFE INSURANCE, testified that an asset that the independent insurance agent has is his expiration dates. Mr. George explained that this is a list of all the policy holders and the dates their policies expire. Mr. George pointed out that if section 2 passes it would in effect give the independent insurance agencies' most tightly guarded secret away to their competitor. Mr. George suggested that this would give an unfair advantage to the competitors. MR. GEORGE pointed out that sections 4 and 5 should be deleted also to eliminate the possibility of a back door opening for banks to get into the insurance business. Number 485 REP. MACKIE responded that according to Mr. Kirkpatrick deleting section 2 would be sufficient since federal law specifically requires that insurance sales be specifically allowed in state statute. REP. PORTER removed his earlier objection to Rep. Mackie's amendment to delete section 2 from the SB 149. REP. SITTON moved SB 149 with individual recommendations, fiscal note and unanimous consent. No objections were heard; it was so ordered. CHAIRMAN HUDSON adjourned the committee at 5:15 p.m.