02/10/2011 03:00 PM House ENERGY

           HB 39-RCA UTILITY RATES; REFUND PROCEDURES                                                                       
                                                                                                                              
4:38:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  PRUITT  made  a  motion  to  adopt  proposed  committee                                                               
substitute (CS) for HB 39,  Version 27-LS0228\D, Kane, 2/9/11, as                                                               
the working draft.                                                                                                              
                                                                                                                                
4:39:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN objected.   As the sponsor, he introduced                                                               
HB  39,  which requires  that  before  a  utility can  collect  a                                                               
refundable rate, it  must have an approved refund  plan in place.                                                               
The bill also  directs the Regulatory Commission  of Alaska (RCA)                                                               
to  devise   a  standard  refund  procedure   available  for  all                                                               
utilities to use in their  rate filings.  Representative Petersen                                                               
explained  that  this  issue  came  to  his  attention  when  his                                                               
constituents questioned the delay  in receiving refunds due after                                                               
litigating  against a  utility.   Although the  decision was  not                                                               
appealed  by the  utility, the  refund procedure  took over  nine                                                               
months to complete.  He opined  the bill would allow consumers to                                                               
receive  refunds faster,  utilities  would save  legal costs  and                                                               
interest,  and  the  RCA  would not  have  to  adjudicate  refund                                                               
procedures.                                                                                                                     
                                                                                                                                
4:41:20 PM                                                                                                                    
                                                                                                                                
DAVID  DUNSMORE,  Staff,  Representative  Pete  Petersen,  Alaska                                                               
State  Legislature, informed  the committee  the bill  would only                                                               
apply to refundable rate cases.   Beginning a sectional analysis,                                                               
he said section 1 explicitly creates  the option of having a plan                                                               
preapproved by  the RCA.   Section 2  incorporates implementation                                                               
language,  Section 3  directs that  the bill,  if enacted,  would                                                               
take  effect   on  7/1/13,  and   Section  4  directs   that  the                                                               
implementation  section  would  take  effect  immediately.    Mr.                                                               
Dunsmore  recognized  Anchorage   Water  and  Wastewater  Utility                                                               
(AWWU)  and   Chugach  Electric   Association,  Inc.   for  their                                                               
contributions to the bill.                                                                                                      
                                                                                                                                
4:43:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER asked  whether there are cases  in which a                                                               
rate refund may not be possible.                                                                                                
                                                                                                                                
MR. DUNSMORE explained the general  procedure is for a utility to                                                               
request a tariff filing to modify its  tariff to a new rate.  The                                                               
RCA has  45 days  to accept the  change or to  open a  docket and                                                               
schedule  a  hearing for  testimony  from  the attorney  general.                                                               
Utilities  can request  a nonrefundable  option, but  if the  RCA                                                               
opens a docket,  the utility will usually wish to  charge the new                                                               
rate on an  interim basis while awaiting the  RCA's decision, but                                                               
that is not required.                                                                                                           
                                                                                                                                
4:45:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER clarified  that  in every  request for  a                                                               
rate change, there is the possibility of a refund.                                                                              
                                                                                                                                
MR. DUNSMORE indicated no, because  the utility "could choose not                                                               
to ask  for the option of  refundable rates."  He  opined that in                                                               
most cases the  utility will request the contingency  that if the                                                               
rates are not accepted at first,  customers will be charged on an                                                               
interim basis.   In further  response to  Representative Saddler,                                                               
he confirmed that  if the rate is denied, there  will be a refund                                                               
due,  although  the approved  rate  is  often "somewhere  in  the                                                               
middle."                                                                                                                        
                                                                                                                                
4:46:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT asked whether there  is support for the bill from                                                               
utilities or others.                                                                                                            
                                                                                                                                
REPRESENTATIVE LYNN inquired as to any opposition.                                                                              
                                                                                                                                
4:47:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN said  he was not aware  of any opposition                                                               
at this time.                                                                                                                   
                                                                                                                                
4:47:18 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT referred to the  additional staff required by the                                                               
RCA as indicated  on the accompanying fiscal note.   He asked for                                                               
the purpose of this staff.                                                                                                      
                                                                                                                                
4:47:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  said that  according to the  chairman of                                                               
the RCA, the commission is very short-handed right now.                                                                         
                                                                                                                                
4:48:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  reviewed the  circumstances of a  refund. He                                                               
observed that  the bill would  require that  a refund plan  is in                                                               
place before the refund process  begins, "so everybody knows what                                                               
is to  be expected, and  the plan is in  place, and that  way the                                                               
ratepayers can be paid sooner."                                                                                                 
                                                                                                                                
REPRESENTATIVE PETERSEN indicated yes.                                                                                          
                                                                                                                                
4:49:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  recalled  that the  ENSTAR  Natural  Gas                                                               
Company (ENSTAR)  litigation on a  rate refund [RCA  docket U-08-                                                               
142  ENSTAR] took  about  two years  to resolve.    He asked  how                                                               
ratepayers who move out-of-state are reached.                                                                                   
                                                                                                                                
MR. DUNSMORE advised  that ENSTAR sent notices  to its customers'                                                               
last known addresses.                                                                                                           
                                                                                                                                
4:51:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT  asked whether the utilities  have indicated that                                                               
enactment  of the  bill  would cause  additional  cost that  they                                                               
would pass on to their customers.                                                                                               
                                                                                                                                
REPRESENTATIVE PETERSEN said  the intent of the bill  is to lower                                                               
cost by making refunds simpler and easier for everyone.                                                                         
                                                                                                                                
4:51:54 PM                                                                                                                    
                                                                                                                                
MR. DUNSMORE  added that this  issue is addressed by  a committee                                                               
substitute (CS).   Chugach  Electric Association,  Inc. suggested                                                               
adding language to  the bill that specifically  states the option                                                               
that the  utility does  not have  to create  a refund  plan "from                                                               
scratch,  [but] the  RCA will  have a  preapproved plan  in place                                                               
that  utilities  can  take  advantage of  when  they  file  their                                                               
rates."                                                                                                                         
                                                                                                                                
4:52:43 PM                                                                                                                    
                                                                                                                                
STUART  GOERING,  Assistant   Attorney  General,  Commercial/Fair                                                               
Business Section,  Civil Division (Anchorage), Department  of Law                                                               
(DOL), disclosed  the various functions  of the  attorney general                                                               
related  to  the  Regulatory  Commission of  Alaska  (RCA).    He                                                               
clarified that  he was  now representing the  RCA and  his duties                                                               
are  to advise  the  RCA during  adjudication  processes, and  to                                                               
represent it  on appeal.   Mr. Goering stated that  his testimony                                                               
was  at the  request  of  the RCA's  chairman,  and  that he  was                                                               
primarily available for questions, but  advised that the scope of                                                               
his  comments  would  be  limited  to  technical  and  procedural                                                               
matters.  If the committee  desires testimony from the commission                                                               
on policy  matters, an issue must  be raised in a  public meeting                                                               
with  the  commissioners  as  a  whole  to  establish  the  RCA's                                                               
position.   Calling  attention  to the  bill,  Mr. Goering  noted                                                               
Section  2  addresses  the  "procedures  and  guidelines  for  an                                                               
acceptable utility  refund plan."   He stated  that the  only way                                                               
for the RCA, or any state  agency, to set policy and to establish                                                               
enforceable guidelines and procedures  is through the regulations                                                               
process  governed by  the Alaska  Administrative Procedures  Act,                                                               
and that  the act "is  not actually a, something  that's designed                                                               
for rapid action."   These procedures are outside  the control of                                                               
the  RCA, and  it  would be  unlikely that  the  RCA could  adopt                                                               
regulations  implementing the  concept of  the bill  by 1/1/2012.                                                               
He described the  regulation procedure.  In  addition, he pointed                                                               
out that  RCA docket U-08-142 ENSTAR,  seems to be the  basis for                                                               
the  proposed  bill;  however,  that  was  a  truly  unique  case                                                               
involving  not  a  normal  rate,  but  a  rate  under  a  special                                                               
provision in the commission's  regulations relating to adjustment                                                               
clauses.  As those rates  become effective in a different manner,                                                               
he  stressed  that  the  abovementioned   docket  was  "a  really                                                               
extraordinary situation and  it is very unlikely  that any refund                                                               
plan ...  in advance  could have  taken, could  have anticipated,                                                               
there being  a refund ...."   Mr. Goering opined that  refunds in                                                               
general have to  be viewed on a case-by-case basis,  and often it                                                               
is unknown  what will  be appropriate  for the  refund procedure.                                                               
He then  addressed an earlier question  of when there could  be a                                                               
situation  in  which   a  utility  would  never   face  a  refund                                                               
obligation.  He answered that a  utility may file for a rate that                                                               
is lower  than its existing rate  thus there would be  no refund.                                                               
Returning to  the language in proposed  HB 39, he said  there are                                                               
two ways  a utility can handle  the way money is  collected under                                                               
an interim rate.  The first is that  the money can be used by the                                                               
utility for operations, with allowances  for the possibility that                                                               
it may be needed to meet a refund obligation.                                                                                   
                                                                                                                                
5:01:49 PM                                                                                                                    
                                                                                                                                
MR. GOERING  continued to  explain that the  other option  is for                                                               
the  utility  to put  the  difference  between the  previous  and                                                               
interim  rates in  escrow, thereby  preventing a  situation where                                                               
there is  a potential refund in  the tens of millions  of dollars                                                               
that  the   utility  cannot  pay.     On  the  other   hand,  the                                                               
administrative costs  of issuing  a refund  could far  exceed the                                                               
amount of  a very small  refund.   He concluded that  each refund                                                               
case is unique  and designing a refund plan "that  will cover all                                                               
possible  situations   would  be   a  lot  more   difficult  than                                                               
adjudicating them case-by-case."                                                                                                
                                                                                                                                
5:03:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER asked the RCA to explain its fiscal note.                                                                
                                                                                                                                
MR. GOERING deferred to RCA Commissioner Patch.                                                                                 
                                                                                                                                
5:05:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR PRUITT announced that HB 39 was heard and held.