Legislature(1999 - 2000)
03/22/2000 08:09 AM House URS
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 169 - ELEC.COOPS:EXPANSION & POLITICAL ACTIVITY Number 0046 CHAIRMAN HUDSON brought before the committee HOUSE BILL NO. 169, "An Act relating to including the costs of expansion activities and political activities in rates of electric cooperatives." REPRESENTATIVE GREEN, speaking as sponsor of HB 169, explained that over the past few years, there has been a lot of money expended through the media for a potential takeover involving two cooperatives in the Anchorage and Matanuska-Susitna areas. Prior to that, there was some problem involving the Matanuska Electric Association and Chugach Electric Company. He said all of that had been done without the approval of the members of the co-ops involved. Those costs constitute a considerable amount of money that in an efficiently run organization could reduce the ratepayers' costs for electricity. That was the premise upon which this bill was introduced. Number 0153 JEFF LOGAN, Staff to Representative Joe Green, Alaska State Legislature, noted that when HB 169 was scheduled last year, former Representative Ed Willis waited for a couple of hours and didn't have a chance to testify. CHAIRMAN HUDSON said he was aware of that, and would call on Mr. Willis first. MR. LOGAN asked members to keep in mind the idea of customer choice that they had heard repeatedly from supporters of HB 248. He said the core mission - and reason for being - of Alaska's member-owned cooperatives is to provide electricity to their members. Thus HB 169 only affects those members. Co-ops will have to comply with HB 169 only if they engage in political or expansion activity, both of which are defined in the bill. MR. LOGAN noted that the co-ops' obligations under HB 248 also are clearly specified in the bill. The co-op must advise the member/owner that a portion of the rate is going to be used for political or expansion activity; identify how much of the rate will be used; tell the member/owner that the management of the cooperative will not refuse to serve or discriminate if the member/owner does not wish to participate; and receive the consent of the customer. MR. LOGAN referred to another bill, which he said was really this bill with a different number, that was heard in the committee in 1998. He said the message in opposition to that bill then was, "It's too early. We don't need it." While the utilities were before the legislature saying the bill was not needed, however, they were spending hundreds of thousands of dollars of members' rate money on expansion activities. Representative Green has re- introduced the bill because he thinks it is needed, Mr. Logan explained. The assumption [of co-op members] is that they are only paying to have electricity delivered to their house, and they should be able to decide if they want to pay for other activities. Number 0490 ED WILLIS, Member, Matanuska Electric Association(MEA), an electric power cooperative, began his testimony by reading: MEA wants to finish what it started. Joining Chugach will make MEA stronger when deregulation arrives, and huge savings still await us. Members should benefit from those savings. That's why your MEA board proposes a $500 payment to each member. MR. WILLIS said that statement, taken from a direct-mail piece that MEA had sent to its members, illustrates the connection between deregulation and one utility's very expensive reaction to it: the attempted hostile takeover of a much larger neighbor utility. "That incredibly expensive and ultimately totally unsuccessful takeover plan by MEA is what prompted me into action," he said, "and why I am now before you supporting this legislation, HB 169." MR. WILLIS said last year he co-chaired a committee formed to recall members of the MVA board of directors. The dissidents' position was that the board's actions with respect to the failed takeover attempt had not been in the members' best interests. Mr. Willis said MEA management had vigorously fought the recall effort and the petition to place a bylaw amendment before the members. Ultimately, after having to go to court repeatedly to get the judge to order MEA to act according to its own bylaws, the voters were allowed to vote on both matters, but not before MEA spent hundreds of thousands of dollars of ratepayers' [payments] to fight the effort. MR. WILLIS said he thinks it is wrong for a member like himself to be forced to pay for an expensive legal battle in order to get MEA management to comply with the cooperative's own bylaws. It was only after a court order that MEA ultimately disclosed $740,000 in expenses for the Chugach Electric Association takeover. "Why should the membership have to get a court order to have their cooperative disclose how much they are spending and on what?" he asked. Number 0709 MR. WILLIS said he objects to the spending and does not want to pay for it in his light bill. After another court battle, the dissident group was able to compel MEA to place on the annual meeting ballot a proposed bylaw amendment to accomplish what HB 169 seeks to do. MEA spent hundreds of thousands of dollars fighting the amendment. Mr. Willis said co-op administrators purposely placed the amendment on the back of a voters' packet to create confusion about the bylaw amendment and then duplicated the amendment so it was unreadable. MR. WILLIS testified that the amendment almost passed. He is sure that it would have done so if MEA had not spent ratepayers' funds to defeat it. The court ordered MEA to pay the dissidents' legal fees totaling $89,000. The co-op has appealed the decision, and Mr. Willis says he strongly objects to members' fees being spent for the costs of that appeal. MR. WILLIS emphasized that electricity is vital. He said he has no qualms about paying for costs associated with its generation, transmission, and distribution. However, he strongly objects to being forced to pay for "speculative, non-necessary expenses." He said he believes HB 169 is good public policy to employ while debate over restructuring is underway. Once a long-term, defined plan for the future of electric deregulation is in place, it might be appropriate to revisit the issue. Meanwhile, stopping the kind of wasteful spending such as that in the MEA service area would be a positive step for all the member/owners of electric cooperatives throughout the state, he said. Number 0921 TUCKERMAN BABCOCK, Manager of Government and Strategic Affairs, Matanuska Electric Association, said he certainly could sympathize with Mr. Willis' position. However, he pointed out, the board of directors at MEA, like those of every other co-op, is elected by the members. There are annual elections, incumbents are defeated, and changes take place in that fashion. He took issue with the premise that it was unwise for MEA to have spent money on the effort to acquire Chugach Electric. "Why is it unwise to spend $500,000 or $600,000 if what's on the table is saving $100 million?" he asked. He suggested that for membership, it had been a wise effort, even though it was ultimately unsuccessful. MR. BABCOCK pointed out that MEA members had endorsed the effort to acquire Chugach with a 59 percent advisory vote. Members voted against the bylaw amendment, 54 to 46 percent, and MEA suggests that the legislature not force a method of business operation where any particular member of 32,000 can object to any particular activity undertaken at any particular time and get his or her 2.5 cents or 5 cents back with each objection at each stage of that process. Mr. Babcock said the appropriate method for making changes in co-op structure is through the board of directors. He urged the committee to leave the existing structure in place and not support HB 169. Number 1045 CHAIRMAN HUDSON declared that discussion of HB 169 would be continued at the next meeting. He apologized to those waiting on the teleconference network and said staff would contact them when HB 169 was going to be considered again. [HB 169 was held over.]
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