03/22/2011 01:30 PM House FINANCE

HOUSE BILL NO. 24                                                                                                             
                                                                                                                                
     "An Act extending the termination date of the                                                                              
     Regulatory Commission of Alaska; and providing for an                                                                      
     effective date."                                                                                                           
                                                                                                                                
2:29:02 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  explained that the proposal  to extend the                                                                    
Regulatory Commission  of Alaska  (RCA) had  been previously                                                                    
included in  another bill, and  had been separated  out into                                                                    
HB 24 in order to simplify the issue.                                                                                           
                                                                                                                                
KONRAD JACKSON, STAFF,  REPRESENTATIVE KURT OLSON, explained                                                                    
that HB  24 would extend the  RCA's sunset date to  June 30,                                                                    
2019. He  pointed to the  summary and the  Legislative Audit                                                                    
recommendation  for  an  eight-year  extension.  Legislative                                                                    
Audit  had noted  that the  RCA had  taken steps  to address                                                                    
issues raised in the 2006  audit, even though everything was                                                                    
not completely resolved.                                                                                                        
                                                                                                                                
Co-Chair   Stoltze  noted   that  the   proposed  eight-year                                                                    
extension was an indication that  there were still problems.                                                                    
He wondered whether  it would be fair to say  that the state                                                                    
would continue to have a regulatory commission.                                                                                 
                                                                                                                                
Mr. Jackson responded in the  affirmative. He added that the                                                                    
intent was an eight-year  extension. He believed Legislative                                                                    
Audit  was  comfortable with  the  process,  since they  had                                                                    
recommended the extension.                                                                                                      
                                                                                                                                
Vice-chair  Fairclough   stated  that   she  held   the  RCA                                                                    
responsible for the energy  shortage in Southcentral Alaska.                                                                    
She  stated her  intent to  file  an amendment  to make  the                                                                    
proposed  extension  much shorter.  She  wanted  to have  an                                                                    
extensive conversation about the  shortfalls and to hear the                                                                    
challenges faced  by those  who had  to go  to the  RCA. She                                                                    
supported having  a consumer protection agency,  but she was                                                                    
concerned  about brownouts  and blackouts  in the  Anchorage                                                                    
area.                                                                                                                           
                                                                                                                                
2:34:12 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  pointed out that there  were people absent                                                                    
from the hearing.                                                                                                               
                                                                                                                                
PAT DAVIDSON,  LEGISLATIVE AUDITOR, DIVISION  OF LEGISLATIVE                                                                    
AUDIT, explained that during the  audit, the agency had made                                                                    
a recommendation  for an  eight-year extension;  inherent in                                                                    
the recommendation  was the continuing  every-two-year audit                                                                    
requirement in place  to review whether the  RCA was meeting                                                                    
its  statutory  timelines  with   regard  to  the  cases  in                                                                    
dockets.  Additionally, information  included in  the annual                                                                    
report  was in  the  missions and  measures,  and any  other                                                                    
performance  objectives that  management  decided to  adopt.                                                                    
The  every-two-year  audit  was   one  of  the  reasons  the                                                                    
recommendation was for an eight-year extension.                                                                                 
                                                                                                                                
Representative Edgmon noted that he  had served on the House                                                                    
Special Committee on Energy and  appreciated the work of the                                                                    
RCA.  He recalled  seeing the  organizational chart  listing                                                                    
the accounting and finance staff;  he thought the lineup was                                                                    
inadequate. He  asked whether the  number of staff  had been                                                                    
an issue.                                                                                                                       
                                                                                                                                
Ms. Davidson replied  that the audit noted that  the RCA was                                                                    
experiencing  staff turnover;  however,  the  audit did  not                                                                    
specifically evaluate the adequacy of the number of staff.                                                                      
                                                                                                                                
Representative Edgmon questioned  whether the staffing issue                                                                    
was important  to focus on,  given all  that the RCA  had to                                                                    
oversee.  He  asked  whether   Legislative  Audit  had  been                                                                    
directed to consider staffing.                                                                                                  
                                                                                                                                
Ms.  Davidson replied  that  the audit  looked  more at  the                                                                    
outcomes  and  found that  the  commission  was meeting  its                                                                    
statutory  timelines. She  added  that some  of the  surveys                                                                    
done  with some  of  the utilities  and  customers had  been                                                                    
generally  supportive of  the statutory  timelines, although                                                                    
some of  the timelines  were seen to  be more  generous than                                                                    
some might have wanted.                                                                                                         
                                                                                                                                
2:39:17 PM                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze queried  audit findings  related to  staff                                                                    
and operational or continuity issues  that the length of the                                                                    
sunset would have bearing on.                                                                                                   
                                                                                                                                
Ms. Davidson responded that no  new recommendations had been                                                                    
made in  the audit  report. However, it  was noted  that the                                                                    
RCA  was still  working  on implementing  one  of the  prior                                                                    
audit's  recommendations related  to developing  regulations                                                                    
to establish standards for certain aspects of discovery.                                                                        
                                                                                                                                
Co-Chair Stoltze recalled past six-month extensions.                                                                            
                                                                                                                                
Representative  Costello pointed  to  timelines intended  to                                                                    
elicit  results in  an expedient  manner and  questioned the                                                                    
reason for stop-the-clock activities.                                                                                           
                                                                                                                                
BOB PICKETT, CHAIRMAN, REGULATORY  COMMISSION OF ALASKA (via                                                                    
teleconference), was not  aware of "stop-the-clock" actions.                                                                    
He  referred to  a provision  in statute  for extensions;  a                                                                    
docket could be extended by  agreement of all the parties to                                                                    
that docket, or  the commission could extend up  to a period                                                                    
of 90 days (one time) on its own motion, for good cause.                                                                        
                                                                                                                                
Vice-chair  Fairclough queried  the timing  of the  previous                                                                    
audit's   recommendation    for   the    implementation   of                                                                    
regulations.                                                                                                                    
                                                                                                                                
Ms. Davidson replied that the  recommendations had been made                                                                    
in the audit that was released at the end of 2006.                                                                              
                                                                                                                                
Vice-chair Fairclough  pointed out  that the agency  had had                                                                    
at least four full years to implement the recommendations.                                                                      
                                                                                                                                
Co-Chair   Stoltze  invited   the  RCA   chairman  to   make                                                                    
statements.                                                                                                                     
                                                                                                                                
Mr. Pickett  reported that  the RCA  had been  supportive of                                                                    
the Legislative  Audit's recommendations for  the eight-year                                                                    
extension primarily identified for  stability. He added that                                                                    
four  years prior,  there had  been a  joint executive-  and                                                                    
legislative-branch  task force  on  the RCA;  at that  time,                                                                    
clear issues relating  to the ability to  attract and retain                                                                    
personnel were  identified. He wished  he could  report that                                                                    
substantial progress  had been  made on  the issues,  but he                                                                    
could not.                                                                                                                      
                                                                                                                                
Mr.   Picket   continued   that  since   a   Department   of                                                                    
Administrative  (DOA) effort  and  study made  in August  of                                                                    
2010, the  RCA had experienced  100 percent turnover  in its                                                                    
tariff department,  and decades  of experience had  left the                                                                    
agency  to  take  positions  at  utilities  and  higher-paid                                                                    
employment in other  sectors. The turnover came  at the time                                                                    
the  agency  was  preparing for  the  Trans-Alaska  Pipeline                                                                    
(TAPS)  rate cases.  He noted  a "challenging  situation" in                                                                    
the finance department,  but added that there  had been some                                                                    
progress in the last 60  days with the new administration at                                                                    
DOA.  He pointed  out that  starting  in the  fall of  2011,                                                                    
there  would be  eight weeks  of hearings  with the  Federal                                                                    
Energy   Regulatory   Commission    related   to   strategic                                                                    
refiguration cases.  He maintained  that the  activity would                                                                    
put a burden on the RCA.                                                                                                        
                                                                                                                                
2:44:40 PM                                                                                                                    
                                                                                                                                
Mr. Pickett  did not want  to lose additional  staff because                                                                    
of uncertainty  about the timing  of the extension.  He said                                                                    
that he  shared frustrations related  to the Cook  Inlet gas                                                                    
issues.  He noted  that he  had been  on the  commission for                                                                    
three years and was astounded  that things had gotten to the                                                                    
point they were at.                                                                                                             
                                                                                                                                
Mr. Pickett acknowledged that the  RCA had made decisions in                                                                    
2006 that he would change,  given the chance. He pointed out                                                                    
that in the past couple of  years, the RCA had approved five                                                                    
natural-gas  supply contracts,  natural-gas storage  through                                                                    
the  new  utility, and  was  confronted  with an  excess  of                                                                    
approximately $1  billion of  capital expenditures  on which                                                                    
the commission  would be  making decisions  in the  next few                                                                    
years.  He maintained  that all  of the  activities required                                                                    
competent staff, commitment, and some level of stability.                                                                       
                                                                                                                                
Mr.  Picket explained  that the  RCA dealt  with contentious                                                                    
issues  and that  everybody involved  was  rarely happy.  He                                                                    
stated that  he had  worked to ensure  that anyone  who came                                                                    
before  the  commission  was treated  fairly  and  evaluated                                                                    
properly.                                                                                                                       
                                                                                                                                
Vice-chair  Fairclough acknowledged  the  complexity of  the                                                                    
work. She asked  why the 2006 audit  recommendations had not                                                                    
been completed.                                                                                                                 
                                                                                                                                
Mr.  Pickett  responded  that  it   had  been  a  matter  of                                                                    
prioritization.  The commission  had  started  a process  of                                                                    
soliciting  input   from  the  industry  and   the  impacted                                                                    
parties, and had  worked with Legislative Audit  when it was                                                                    
at the  commission during  the fall  of 2010.  He maintained                                                                    
that there was  currently a higher level of  emphasis on the                                                                    
issue.                                                                                                                          
                                                                                                                                
Mr. Pickett stressed  that the issue was not  easy, as there                                                                    
were so many different  perspectives; expediting the process                                                                    
from any one party's perspective  would impede the rights of                                                                    
another party.  He believed  progress could  be made  in the                                                                    
near future.                                                                                                                    
                                                                                                                                
Vice-chair Fairclough  asked whether  salary issues  made it                                                                    
hard to retain staff, or whether there were other reasons.                                                                      
                                                                                                                                
2:48:14 PM                                                                                                                    
                                                                                                                                
Mr.  Pickett  responded  that   all  possible  reasons  were                                                                    
considered. He stated that the  working environment was very                                                                    
stressful.  He  noted that  the  tariff  division was  being                                                                    
restaffed  and  that  he was  comfortable  with  the  people                                                                    
hired.                                                                                                                          
                                                                                                                                
Vice-chair  Fairclough  questioned  whether  staff  reported                                                                    
directly to him.                                                                                                                
                                                                                                                                
Mr.  Pickett responded  that  there  was middle  management,                                                                    
including an  advisory section  chief, a  commission section                                                                    
chief, and a chief administrative law judge.                                                                                    
                                                                                                                                
In  response to  a  question by  Vice-chair Fairclough,  Mr.                                                                    
Pickett  replied that  the tariff  department  was the  most                                                                    
extreme example.                                                                                                                
                                                                                                                                
Representative   Costello  questioned   how   many  of   the                                                                    
commissioners were assigned to the TAPS rate case.                                                                              
                                                                                                                                
Mr.  Pickett  replied  that   all  five  commissioners  were                                                                    
assigned to the case.                                                                                                           
                                                                                                                                
Representative  Costello  asked  what would  happen  to  the                                                                    
workload  not  related to  the  case.  She wondered  whether                                                                    
other work would be put on hold.                                                                                                
                                                                                                                                
Mr. Pickett  replied that with statutory  deadlines, the RCA                                                                    
did not have  the option to put work on  hold. He noted that                                                                    
past  rate  cases  had   required  all  five  commissioners,                                                                    
especially when  the judicial branch  came into  the process                                                                    
and there  were remands.  He believed all  the commissioners                                                                    
were needed for the TAPS case.                                                                                                  
                                                                                                                                
Representative  Costello   clarified  that  it  was   not  a                                                                    
statutory requirement to assign  all five commissioners, but                                                                    
a management decision.                                                                                                          
                                                                                                                                
Co-Chair Stoltze OPENED and CLOSED public testimony.                                                                            
                                                                                                                                
2:51:48 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:56:38 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-chair Fairclough MOVED Conceptual Amendment 1:                                                                             
                                                                                                                                
     Line 5, change "2019" to "2015"                                                                                            
                                                                                                                                
Representative Doogan OBJECTED.                                                                                                 
                                                                                                                                
Mr. Jackson stated that the  sponsor felt that the year 2015                                                                    
was a  step in  the right  direction. He  did not  think two                                                                    
years was sufficient.                                                                                                           
                                                                                                                                
Mr. Pickett stated that he had no comment on the amendment.                                                                     
                                                                                                                                
Co-Chair  Stoltze asked  whether he  thought four  years was                                                                    
better than two, but still worse than eight years.                                                                              
                                                                                                                                
Mr. Pickett agreed that the assessment was correct.                                                                             
                                                                                                                                
Representative  Gara  asked  whether a  four-year  extension                                                                    
made any difference to the operation of the agency.                                                                             
                                                                                                                                
Mr.  Pickett responded  that the  situation would  depend on                                                                    
the individual assessments  of employees at the  RCA and the                                                                    
commissioners.                                                                                                                  
                                                                                                                                
Co-Chair Stoltze believed Mr.  Pickett was supportive of the                                                                    
eight-year extension.                                                                                                           
                                                                                                                                
Mr. Pickett agreed.                                                                                                             
                                                                                                                                
2:59:16 PM                                                                                                                    
                                                                                                                                
Representative  Wilson queried  the number  of vacancies  at                                                                    
the RCA and how long they had been vacant.                                                                                      
                                                                                                                                
Mr.   Pickett  responded   that  there   were  about   eight                                                                    
vacancies. He offered to get more information.                                                                                  
                                                                                                                                
Vice-chair  Fairclough  recognized  the  difficulty  of  the                                                                    
RCA's  job  and  commended  the work  of  the  chairman  and                                                                    
commissioners.  She  argued  that recommendations  had  been                                                                    
made and regulations had not  been created in the four years                                                                    
allowed.  She  hoped to  come  back  to the  legislature  to                                                                    
provide  the  correct  incentives to  adequately  compensate                                                                    
staff. She  felt recommendations were needed  sooner than in                                                                    
eight years.                                                                                                                    
                                                                                                                                
Representative Gara requested an  explanation of why the RCA                                                                    
had not adopted the regulations.                                                                                                
                                                                                                                                
Mr. Pickett  replied that the rule-making  process had never                                                                    
been  instituted;  once  a  rule-making  process  officially                                                                    
began at a  public meeting, there was a  two-year clock that                                                                    
began  as well.  Currently,  the  RCA was  at  the point  of                                                                    
framing what the draft regulations  might look like in order                                                                    
to begin  moving forward. He  believed that the  process had                                                                    
not  begun in  2006 and  2007 because  there had  been other                                                                    
priorities.                                                                                                                     
                                                                                                                                
3:02:32 PM                                                                                                                    
                                                                                                                                
Representative Doogan WITHDREW his OBJECTION.                                                                                   
                                                                                                                                
Representative Gara OBJECTED to  the amendment. He described                                                                    
history; when he had first  come to the legislature, the RCA                                                                    
had  been embroiled  in fights  between different  companies                                                                    
and there had  been a lot of pressure placed  on the RCA. He                                                                    
thought a shorter  extension would put more  pressure on the                                                                    
RCA to cede  independence that was already  granted to cover                                                                    
consumer matters.  He thought a longer  extension would give                                                                    
the  commission the  green light  to act  as an  independent                                                                    
agency.                                                                                                                         
                                                                                                                                
Vice-chair Fairclough  concurred and  stated that  she would                                                                    
not have  offered a conceptual  amendment if  previous audit                                                                    
recommendations from  2006 had been complied  with. She felt                                                                    
the  RCA had  already been  given  four years  to come  into                                                                    
compliance;  she  wanted  to  hold  commissions  and  boards                                                                    
accountable for  audit recommendations.  She noted  that she                                                                    
did  not  choose  a  two-year  extension  in  the  amendment                                                                    
because  she realized  that the  commission had  a difficult                                                                    
job.                                                                                                                            
                                                                                                                                
Co-Chair  Stoltze   spoke  to   the  issue   of  legislative                                                                    
involvement, pointing out that  there had been no amendments                                                                    
of  substance offered  by anyone.  He thought  the extension                                                                    
was fairly simple, but believed it was possibly too long.                                                                       
                                                                                                                                
3:05:27 PM                                                                                                                    
                                                                                                                                
Representative Doogan spoke in  support of the amendment. He                                                                    
had  wanted to  support the  eight-year proposal,  but found                                                                    
the argument  by Vice-chair Fairclough to  be compelling. He                                                                    
referred to agencies  that had not complied  with audits. He                                                                    
did not  know whether  shortening the  time would  force the                                                                    
RCA to comply,  but he thought there had to  be some kind of                                                                    
consequence for non-compliance.                                                                                                 
                                                                                                                                
Representative  Wilson spoke  in support  of the  amendment.                                                                    
She wanted to  send a message to the  RCA about expectations                                                                    
of consistency and an effort  towards correction in response                                                                    
to audits. She referred to other, similar legislation.                                                                          
                                                                                                                                
Representative  Guttenberg asked  how long  the TAPS  tariff                                                                    
rate case would take.                                                                                                           
                                                                                                                                
Mr. Pickett responded,  "That is an open  question." He said                                                                    
that there were  a number of parties involved  and the issue                                                                    
was contentious.                                                                                                                
                                                                                                                                
Representative   Guttenberg   spoke   in  support   of   the                                                                    
amendment,  but had  concerns that  the same  problems would                                                                    
come up  again in four years,  and then the agency  would be                                                                    
in  the  middle  of  a contentious  issue.  He  thought  big                                                                    
politics would  be involved,  and pressure  would be  put on                                                                    
the board.                                                                                                                      
                                                                                                                                
3:09:05 PM                                                                                                                    
                                                                                                                                
Representative  Doogan  stated  that  he  would  support  an                                                                    
eight-year extension if the RCA  could fix what needed to be                                                                    
fixed by  the following  year, which would  address concerns                                                                    
about  having to  get re-authorization  in the  middle of  a                                                                    
contentious rate case.                                                                                                          
                                                                                                                                
Vice-chair Fairclough stated for the  record that no one had                                                                    
spoken to  her other  than Mr.  Pickett about  problems with                                                                    
the  RCA. She  stated that  she was  not involved  in "phone                                                                    
wars" and  did not  want to be.  However, she  believed that                                                                    
recommendations made by auditors had to be complied with.                                                                       
                                                                                                                                
Representative Gara  MAINTAINED his OBJECTION  to Conceptual                                                                    
Amendment 1.                                                                                                                    
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gara                                                                                                                  
OPPOSED:  Joule,   Wilson,  Costello,   Doogan,  Fairclough,                                                                    
Guttenberg, Thomas, Stoltze                                                                                                     
                                                                                                                                
Representative Neuman was absent from the vote.                                                                                 
                                                                                                                                
The  MOTION   PASSED  (8/1).  Conceptual  Amendment   1  was                                                                    
adopted.                                                                                                                        
                                                                                                                                
3:11:27 PM                                                                                                                    
                                                                                                                                
Vice-chair Fairclough  MOVED to  report CSHB 24(FIN)  out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSHB 24(FIN) was REPORTED out  of committee with a "do pass"                                                                    
recommendation and with the attached  new fiscal note by the                                                                    
House  Finance Committee  for  the  Department of  Commerce,                                                                    
Community and Economic Development.                                                                                             
                                                                                                                                
3:12:30 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:15:15 PM                                                                                                                    
RECONVENED