Legislature(1999 - 2000)
03/17/2000 02:18 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 304
"An Act relating to issuance and sale of revenue bonds
to fund drinking water projects, to creation of an
Alaska clean water administrative fund and an Alaska
drinking water administrative fund, to fees to be
charged in connection with loans made from the Alaska
clean water fund and the Alaska drinking water fund,
and to clarification of the character and permissible
uses of the Alaska drinking water fund; amending Rule
3, Alaska Rules of Civil Procedure; and providing for
an effective date."
Co-Chair Therriault provided members with a proposed
committee substitute 1-GH2031\G, Cook 3/17/00 (copy on
file).
MIKE TIBBLES, STAFF, REPRESENTATIVE THERRIAULT provided
information on the proposed committee substitute. The title
was amended to include "to the Alaska Clean Water Fund".
This reflects changes in the legislation.
References to AS 46.03.032 and AS 46.03.036 were added on
page 1, lines 11 and 12: AS 46.03.032 refers to the Clean
Water Fund, which is waste water and AS 46.03.06 refers to
Alaska Drinking Water Fund (Safe Water).
A technical change was made on page 2, line 18: "for each
program" was deleted. This was no longer needed because both
programs are added under subsection (a).
Mr. Tibbles noted that "as appropriate" replaces
"respectively" in a number of places in the bill.
Section 18 is a new section; it amends the definition of
"other qualified entity". This addresses the Clean Water
Fund and brings in private entities approved under federal
statute 33. U.S.C. 1383. There are no private entities
currently approved under this section. The Drinking Water
Fund was amended in 1996, to allow loans to private
entities. The legislation makes both programs consistent.
In response to a question by Representative Grussendorf, Mr.
Tibbles explained that the intent is to cover privately
owned economically regulated utilities. There are 600
privately owned utilities. Only 24 of them are economically
regulated. The intent is to only cover the economically
regulated privately owned utilities. Page 9, subsection 1(b)
refers to the Alaska Drinking Water Fund and includes
economically regulated organizations that are not exempt
from regulation under AS 42.05.711(d).
Language was added on page 10, line 3 - 6 to allow the
Department of Environmental Conservation to establish
different loan terms, charges and rates. This addresses
concerns that higher risk entities would have a greater
impact.
(TAPE CHANGE, HFC 00 - 72, SIDE 2)
Mr. Tibbles noted that language was also added on page 10,
lines 17 and 18: "a loan may not be made to an organization
that is not a municipality to refinance debt of that
organization"
There is also is a delayed effective date.
Co-Chair Therriault noted that the ability to charge
different rates was requested by the Commissioner of the
Department of Natural Resources.
DAN EASTON, DIRECTOR, DIVISION OF FACILITY CONSTRUCTION AND
OPERATION, DEPARTMENT OF ENVIRONMENTAL CONSERVATION provided
information on HB 304. He noted that the original intent of
HB 304 was to give the department the same bonding authority
for drinking water as the they currently have for waste
water projects. There are two loan programs: the Clean Water
Fund for wastewater projects and the Drinking Water Fund for
drinking water projects. The department has bonding
authority for the Clean Water Fund. The department did not
have bonding authority for the Drinking Water Fund. Bonding
authority allows the department to use bonding revenues to
add more money to the Fund and make more money available for
loans. Bonding mechanisms can be used to pay for the state
match requirement.
Mr. Easton explained that the legislation was also intended
to provide a long-term mechanism to pay for the program's
operational expenses. The program's operational expenses
have been paid with federal funding that will cease. When
federal grants cease an alternative mechanism will be
needed. House Bill 304 allows the department to divert
money, paid back by communities, into another account that
could be used for operating costs through the capital and
operating budgets.
The proposed committee substitute makes privately owned
utilities eligible for loans for the Drinking Water Program.
Federal law currently prohibits loans for sewage and
wastewater projects to privately owned utilities. He
emphasized that the proposed committee substitute would
improve drinking water through financial improvements.
Mr. Easton referred to the department's request for
authorization to charge different rates on loans. He
observed that if loans to private utilities cost more to
make and are higher risk than the department can apportion
interest rates so that higher risk and entities with higher
costs pay more. Municipalities that are lower risk and cost
less would not have to pay the burden of the privately owned
utilities. He spoke in support of the delayed effective
date.
Co-Chair Therriault pointed out that only privately owned
utilities are economically regulated. He quoted from a
letter by the Regulatory Commission of Alaska:
Generally, all economically regulated expenses are
reviewed according to these criteria. Accordingly, any
reduction in debt-service expense associated with
allowed costs would generally be of benefit to the
ratepayers of the utility. The ratepayers would benefit
through rates lower than would otherwise be required to
allow the utility to recover its debt-service expense.
Co-Chair Therriault pointed out that the legislation allows
privately owned companies to lower their customer rates. The
benefit flows to the ratepayer.
Representative J. Davies suggested that a reasonable portion
could benefit the operators. He questioned if the
legislation would cover private drinking water and sewage
projects.
Discussion ensued regarding the legislation's coverage of
drinking water and wastewater projects.
ANDY WARWICK, CHAIRMAN, BOARD OF DIRECTORS, UTILITIES
SECURITIES OF ALASKA spoke in support of the legislation. He
observed that the program replaces general fund monies with
loan dollars and allows the program to expand. The proposed
committee substitute makes the program available to public
utilities regardless of whether they are municipal or
investor owned, as long as the investor owned utilities are
economically regulated. All benefits of the program would be
passed on to the customers. Customers would be on a level
playing field. He maintained that the legislation would
improve the quality of life for all Alaskans.
In response to a question by Representative J. Davies, Mr.
Warwick stated that it is his understanding that federal law
allows privately owned utilities to participate in drinking
water but not the wastewater programs. The legislation, as
it stands, follows the federal law; it does not allow
participation in the wastewater portion. If private
utilities become eligible under federal law than money from
the federal government would allow participation. He
observed that the intent is to participate in whatever is
allowed under federal law. Money is coming from the federal
government with the intent to benefit all utilities.
Representative J. Davies expressed concern that the federal
law could be written in a general way to permit a wide range
of privately owned utilities to participate. He wanted state
statutes to reflect the need that private utilities be
economically regulated (to be eligible for the loan
programs.) Mr. Warwick thought that the legislation
addressed Representative J. Davies' concerns.
Co-Chair Therriault observed that the legislation
specifically addresses drinking water. He noted that an
amendment would be needed to specifically add wastewater.
Mr. Easton concluded that the restriction that private
utilities must be economically regulated only applies to the
drinking water loan program and agreed that an amendment
would be needed to address wastewater.
Representative J. Davies MOVED to ADOPT a conceptional
amendment: add a condition that when sewage programs become
available under federal statutes, that they be allowed, but
that a further requirement be added that they would be
regulated by the RCA and economically regulated in the
manner parallel to the water funds. There being NO
OBJECTION, it was so ordered.
Representative Foster MOVED to ADOPT the proposed committee
substitute work draft, 1-GH2031\G, Cook 3/17/00. There being
NO OBJECTION, it was so ordered.
Representative Foster MOVED to report CSHB 304 (FIN) out of
Committee with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
CSHB 304 (FIN) was REPORTED out of Committee with a "do
pass" recommendation and with a fiscal impact note by the
Department of Environmental Conservation, dated 1/21/00; and
zero fiscal note by the Department of Revenue, dated
1/21/00.
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