Legislature(2013 - 2014)HOUSE FINANCE 519
02/26/2014 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB298 | |
| HB234 | |
| HB268 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 298 | TELECONFERENCED | |
| + | HB 234 | TELECONFERENCED | |
| + | HB 268 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 234
"An Act extending the termination date of the
Regulatory Commission of Alaska; and providing for an
effective date."
1:41:12 PM
REPRESENTATIVE MIKE HAWKER, SPONSOR, presented HB 234,
which extended the termination date of the Regulatory
Commission of Alaska (RCA). He explained that the bill
extended the Regulatory Commission of Alaska for a period
of eight years, which was allowable under statute. The
request was consistent with recommendations made by the
state auditor. He noted that the auditor's requirements
were to determine a public need for the continued existence
of the commission and whether it operated in an efficient
and effective manner. The auditors found that the
commission met all of the requirements of the extension. He
pointed out that issues existed in the past but were
resolved. He stressed the difference between the public
disagreeing with a ruling from the RCA versus the
functionality of the commission. He reiterated that the
audit demonstrated that the commission was functioning well
and in accordance with statute.
Representative Hawker pointed to the appendices of the
audit (copy on file) on pages 23 to 30. He detailed that
the audit appendices were a survey of the users of the
agencies. The surveys showed how the agencies were serving
its stake holders and were an integral part of the
reauthorization audits. He understood that the Regulatory
Commission of Alaska was often disliked because individuals
disagreed with its rulings. He noted that the appendices
and details in the summary on page 18 of the audit reported
favorable comments and statistics in their ratings. As many
as 70 percent of the respondents gave a good or very good
rating for the RCA, with only 8 percent issuing unfavorable
ratings. He thought that the 70 percent rating was
remarkable considering that the RCA dealt with
controversial issues. He referenced Appendix C, page 31 of
the audit, which indicated that "the current structure of
regulatory cost charges were sufficient and adequate for
the organization to function." He emphasized that the
commission was operating "in the black" in addition to
meeting its statutory obligations for quality regulation
and protection of the public welfare.
Representative Hawker discussed the two issues noted in the
audit. Item one was a perennial issue that indicated that
the commission needed to undertake better documentation of
its review process. He pointed out that the documentation
process was an internal process within the agency and was
different than issues about the outcome of the commission's
regulatory process. The issue was a matter of "improving
its paperwork handling." He read the recommendation, "RCA's
chair should improve and enforce written procedures to
ensure case management." He summarized that the
recommendation was not a criticism of the commission's work
performance or regulatory activities.
Representative Hawker discussed the second recommendations
which dealt with regulatory dockets. He defined regulatory
dockets as "having a question asked and answered" as part
of the regulatory process. He read from the Second
recommendation: "The legislature should consider clarifying
AS 42.05.175(e) to ensure RCA fulfills legislative intent
when processing regulatory dockets." He maintained that the
RCA believed it was in compliance with the statute and
thought the issue was "a management debate." He alluded to
the historical problems which lead to the creation of the
Regulatory Commission of Alaska and described its
beginnings as a "bumpy road."
1:50:40 PM
Representative Hawker acknowledged it was a long road to
develop the commission into what it was today. He asked the
committee to consider the commission as it operated
currently and asked the committee to help the RCA improve
and address the issues identified in the audit. He argued
that the agency had matured and merited the eight year
extension. He believed that the extension enhanced the
stability of the agency instead of operating under the
burden of uncertainty under one year extensions. He
strongly advocated for setting the agency free to function
with trust for the next eight years.
Vice-Chair Neuman asked about the smaller independent
companies that operated in the Cook Inlet region gaining
access to gaslines and with contractual obligations with
utility companies. He wondered whether some of the issues
were resolved.
Representative Hawker directed the question to the RCA. He
asked the committee members to consider the operations and
functioning of the commission whether or not individuals
agreed or disagreed with a ruling of the commission. He
added that the approval of long term gas supply contracts
in Cook Inlet had been problematic for him in his role as a
legislator. He reminded the committee that the Cook Inlet
Recovery Act [HB 280Natural Gas: Storage/ Tax Credits
Adopted 2010] removed the block that prevented the
commission from approving long term gas supply contracts.
The provision mandated that the RCA not only consider the
least expensive option, but examine how its decision
impacted the community. The cited statute was included in
many contract approvals published by the RCA since the law
was enacted. He believed that the commission played a large
role in the recent success of resource development and gas
supply in Cook Inlet.
Representative Gara viewed the bill as a non-controversial
agency extension issue.
KRIS CURTIS, LEGISLATIVE AUDITOR, ALASKA DIVISION OF
LEGISLATIVE AUDIT discussed the RCA sunset audit, dated
July 2013. She concurred that Legislative Audit concluded
that the RCA served the public's interest and recommended
the maximum 8 year extension allowed in statute. She
restated the two audit recommendations. The auditor
discovered high error rates in the commission's data and
recommended improvement. Secondly, Legislative Audit made a
recommendation to the legislature concerning clarification
regarding regulatory dockets. She delineated that RCA
recorded its activity in dockets. Statutes required the RCA
to issue final orders in a rule making docket within 730
days plus one 90 day extension. Statutes prohibited the
commission from "terminating a proceeding in a docket and
opening a proceeding in another docket on substantially the
same matter." The audit discovered instances where the RCA
split the rulemaking proceedings into two dockets:
· One docket considered the need for regulations. Once
public testimony was completed the docket was closed
· The second docket considered the adoption of
regulations. This process allowed the Regulatory
Commission of Alaska to take up to four and one half
years to complete proceedings.
Ms. Curtis added that "RCA management believes that
including clear intent language in a regulatory docket's
initiating order makes the process transparent and complies
with Alaska Statutes." Legislative Audit acknowledged that
the commissions dockets included clear intent language and
was transparent in that regard. She felt that the practice
evaded the statutory timelines and it appeared not to serve
the regulatory community or public's interest. The
legislature should consider clarifying the statute to
ensure RCA fulfills legislative intent when processing
regulatory dockets.
1:59:38 PM
TW PATCH, CHAIRMAN, REGULATORY COMMISSION OF ALASKA,
thanked the sponsors for advancing HB 234. He reported that
he was elected Chairman of the commission for 3 terms. He
felt that the agency had earned the legislator's trust and
requested the extension of the 8 year statutory maximum. He
appreciated the auditor and believed the audit was
"rigorous and thorough." He believed the commission earned
the entire 8 year extension. He understood the reason for
the previously shorter extensions. He relayed that the
legislature requested a report by the commission on how to
improve its process. The RCA filed the report on January
16, 2012 which included its goals and had complied with all
of them. In addition, the RCA filed a report on January 21,
2014. The report detailed the commission's completion of
four regulations dockets and how it worked cooperatively
with parties to early identify the complex issues in order
to achieve a shorter timeline for the rulings. The
commission continued to design and develop regulatory
practices that enabled generally shorter timelines but
still allowed "compilation of a sound statistical record."
Mr. Patch continued that the initial report demonstrated
that the utility dockets were managed according to the
statutorily prescribed timelines and completed within
approximately 450 days. He reported that over the last
three years the process was greatly improved and the
current year's utility dockets were completed in 311 days;
a reduction of nearly six months.
Co-Chair Stoltze asked if utility dockets were rate
adjustment dockets.
Mr. Patch replied that the utility docket was when "a
revenue requirement was established or a rate design was
established." Utility dockets created the most anxiety
among the commissions "constituency." He related that the
regulated utility companies acknowledged that the process
was greatly improved and appreciated. The company's credit
ratings were enhanced by the shorter timeframe, which
created faster "regulatory and rate of return certainty."
The RCA improved its process without requested additional
funding or staff, enabling legislation, and without adverse
impacts to industry or companies.
Mr. Patch stated that the improvements were aided in part
by the Regulatory Affairs and Public Advocacy Sections of
the Department of Law and the utility companies. He
applauded the administration's commissioners and the RCA
staff for the majority of the effort. In addition the RCA
routinely assisted the legislature and other state agencies
on a number of important policy matters. Legislators
regularly consulted with the RCA on legislation related to
regulatory issues without addressing the "substance" of the
bills. He indicated that the commission had consulted on HB
280 [Natural Gas: Storage/ Tax Credits Adopted 2010], HB 4
[Alaska Gasline Development Corp; Regulatory Commission of
Alaska Adopted 2013], HB 9 [In-State Gasline Development
Corp 2012], and was currently consulting on SB 196/HB 340
RCA: Railbelt Electric Utility Report.
Mr. Patch listed the agencies the Regulatory Commission of
Alaska routinely assisted: The Alaska Oil and Gas
Conservation Commission, Department of Environmental
Conservation (DEC) on capacity development and public
health issues and procured funding from the rural utility
service; Department of Natural Resources (DNR), Oil and Gas
Division, and oversaw the state's pipelines regarding
safety conditions. The RCA assisted the AGDC with the
development of its tariff.
Mr. Patch strongly disagreed with the second recommendation
of the audit that the legislature should clarify the
timeline statute. He referenced a letter he wrote dated
September 4, 2013 stating the reasons he disagreed with the
finding.
2:10:12 PM
Mr. Patch cited docket R-10-002 from a regulatory
proceeding, and recounted that the subject matter
considered the need for regulations involving discovery. In
a subsequent docket, the subject matter was a proposal of
specific discovery regulations. He stressed that the RCA
and Department of Law (DOL) considered the subject matter
"two distinctly different questions." He assured the
committee that the commission had not evaded the
legislature's requirements. Both dockets were resolved in a
timely manner. He explained that the RCA had not developed
a process to gather preliminary information in order to
make a decision. The commission changed the process before
the audit and instituted a new docket called an "I docket"
or "information docket." The information dockets were now
regularly employed for preliminary scoping and decisions
and subsequently preceded to a regulations docket for the
adoption of regulations. He concluded that he disagreed
there was a need for legislative action.
NORMAN ROKEBERG, COMMISSIONER, REGULATORY COMMISSION OF
ALASKA, echoed the testimony of the Chairman Patch and the
sponsor. He believed that the operational progress under
the leadership of the chairman earned the legislature's
confidence in the ability of the commission to carry out
its work. He offered that the commission was able to carry
out its statutory mandates and the policy calls of the
legislature. He urged for adoption of the audits
recommendation to grant the 8 year extension.
Co-Chair Stoltze asserted that he did not always agree with
every decision the RCA made but had much confidence in the
commission's competence and decision making process.
Vice-Chair Neuman noted the mission of the RCA was to
oversee regulation of public utilities and pipeline
carriers. He questioned whether the commission addressed
issues of pipeline access by smaller utility companies.
Mr. Patch replied that access to pipelines was carried out
in a non-discriminatory manner. He assured the committee
that there was no difficulty in terms of accessing
pipelines. He shared that the commission was considering a
matter regarding the consolidation of the ownership,
management, and rate structure of Cook Inlet pipelines. He
did not know of any difficulty with small exploratory
companies accessing pipelines for the use of transporting
its product. He thought that the question asked was about
small producer's access to markets, which was different
than pipeline access. He shared that the RCA received
comments from small producers regarding the access to
markets. In addition, the commission was considering
another open docket in a preliminary stage, with the same
companies that expressed dissatisfaction with lack of
market access. He suggested that the legislators examine
"texts", pronouncements by commissioners on their view of
market access in RCA rulings. He offered to provide a link
for the open docket case to examine public materials. He
was unable to comment further on the open docket cases.
2:20:02 PM
Vice-Chair Neuman asked about the relationship with the
Division of Oil and Gas and small companies in Cook Inlet.
He had heard of unfair treatment and wondered whether the
commission was familiar with the issue.
Mr. Patch clarified that he was unaware of complaints
against the RCA or the Division of Oil and Gas.
Mr. Rokeberg followed up on the question related to gas
supply contracts in Cook Inlet. He expounded that the RCA
role was to approve or disapprove of the contracts. The
commission was prohibited to comment on issues related to
an active docket. He offered to provide members with copies
of his concurrence on issues related to tariff filings on
sales of gas by Hilcorp to Enstar, and Chugach Electric,
and a recent docket filing related to the issues of
independent exploration, development, and sales of gas in
Cook Inlet. The concurrence included a 20 year history of
the legislature's involvement to incent Cook Inlet gas
development. He noted the concurrence included multiple
comments regarding open access to the gasline between one
carrier and another. He informed the committee that
Chairman Patch alluded to the outstanding docket on an
Enstar tariff filing that concerned smaller independents
access. He expressed concern over the lack of opportunity
for small gas producers to sell into the market place. He
expressed additional concern about a "floor" for gas prices
to rate payers in Cook Inlet that was part of a recent
contract between a number of utilities and Hilcorp.
Representative Gara wondered whether the commission's
shorter time period for final rulings harmed the interest
of the consumer.
Mr. Patch responded that the primary mandate of the RCA was
rate regulation. The commission considered consumer
interests when determining rates. He explained that a
primary consumer interest was low rates and the other was
dependable, quality utility delivery. He understood that
most people would prefer lower utility bills. He sought a
balance between "a just and reasonable rate." He measured
the needs of the utility company and the needs and quality
of service for the consumer. He thought that the RCA did a
good job with rate regulation.
Representative Gara thanked the RCA commissioners for their
hard work.
2:30:09 PM
Mr. Patch returned the compliment and thanked the members
for their hard work.
Co-Chair Stoltze asked about oversight of water utility
regulation. He remarked that often mayors of municipalities
tried to force individual's participation in municipal
water systems. He viewed the RCA as a force for consumer
protection to avoid "being force fed utility
participation." He asked for the commissioner's view on the
issue as a former legislator.
2:32:14 PM
AT EASE
2:32:22 PM
RECONVENED
Mr. Rokeberg replied that his former district as well as
Representative Costello's had 3,000 to 5,000 residents
served by water wells or small water systems that were not
part of the municipal utility. The situation was common
throughout the state. He related the difficulty for the RCA
to assist small utilities. He felt that further policy was
needed related to rate regulation of smaller utilities.
Rate regulation by the RCA was burdensome and could be
expensive for a small group. He suggested that the
legislature may want to address the issue and to give the
commission the ability to create a tier system. He detailed
that many small water utilities wanted to qualify for the
federal Safe Drinking Water Act funding, which mandated
regulation by the commission to qualify. The desire to
provide safe drinking water drove the utility into
regulation that they may not want or could afford. He
thought that many of the legislators were familiar with the
situation.
Co-Chair Stoltze asked whether the commission could address
the issue within the commission structure and was not
seeking an "outside solution."
Mr. Patch answered that the commission had adopted some
measures to address smaller water utilities water and
wastewater concerns. The RCA offered a provisional
certification that was available for rural areas. There
were certain things the commission could do, but the
commission lacked the statutory authority to "revise the
state drinking water act or to federal funding." He vowed
to discuss the issue with members of the rural utility
service Division of the United States Department of
Agriculture and DEC.
Co-Chair Stoltze reiterated his belief that the RCA played
a major role in the consumer protection against
consolidation of municipal water utilities.
Representative Guttenberg asked how the RCA came to the IGU
[Interior Gas Utility] ruling.
Mr. Patch suggested that the discussion take place at a
later time in a different forum after both parties read the
RCA's final order.
Vice-Chair Neuman discussed that Talkeetna received federal
funds for safe water and sewer, but struggled with
continued financing for the water and sewer utility. He
wondered what role the commission played in assisting
communities with similar issues.
Mr. Patch restated that consumer protection was one of the
commission's major concern. He was not prepared to address
the issue at present but would respond by letter shortly.
2:43:52 PM
Co-Chair Stoltze OPENED public testimony.
Co-Chair Stoltze CLOSED public testimony.
Representative Costello discussed the fiscal note, FN1
(CED) for the extension of the agency. In FY 15 the
expenditure was $9.430.8 million for 58 full time positions
and 4 temporary positions. In FY 16 the expenditure was
$9294.5 million for 58 full time positions and 3 temporary
positions. The fiscal impact repeated itself for the fiscal
years through 2020.
In response to a question by Representative Gara, Mr. Patch
indicated that the RCA was funded by a regulatory cost
charge, and not by the general fund. He explained that a
small component charge was added to each utility bill
collected by the utilities and forwarded to the Department
of Revenue for the commission's expenditures. In addition,
the commission may charge uncertificated utilities for the
commission's actual time. He stated that the charge was not
placed on the rate payers.
Representative Costello noted that the commission had a
surplus. She questioned whether the surplus funds were
expended by the RCA.
Mr. Patch replied that the surplus was rebated to
ratepayers as part of the RCC calculation for the
subsequent year.
2:50:17 PM
Vice-Chair Neuman MOVED to REPORT HB 234 out of committee
with individual recommendations and the accompanying fiscal
note. There being NO OBJECTION, it was so ordered.
HB 234 was REPORTED out of committee with a "do pass"
recommendation and with one previously published fiscal
impact note: FN1 (CED).
2:51:52 PM
AT EASE
2:53:38 PM
RECONVENED