Legislature(1997 - 1998)
04/06/1998 03:18 PM House L&C
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HCR 34 - JT COM ON ELEC UTILITY RESTRUCTURING Number 0829 CHAIRMAN ROKEBERG said the next order of business before the committee was HCR 34, Establishing a Joint Committee on Electric Utility Restructuring. He noted this legislation was being introduced as a House Labor and Commerce Resolution to establish a joint committee of this body [the House] with the Senate to take up and review the needs for statutory changes within the Alaska regulatory scheme on the whole issue of electric utility restructuring, which in some parlance is called deregulation, but it really isn't because it's not perceived to necessitate a complete repeal of all regulation and oversight of the electric utilities. He explained that HCR 34 would allow a joint committee to review any proposals for those statutory changes to allow either all or a part of what's called retail wheeling or retail competition for electrical power in the state. He further stated, "We currently now have, as is nationally, what's called wholesale wheeling or the ability to take power and sell it on a wholesale basis across the state, which is done in the railbelt area, to various power sources, primarily Chugach Electric Association who wholesales power to virtually everybody along the railbelt power grid and so forth." The issue currently is whether or not Alaska should adopt any changes to allow this for retail competition. CHAIRMAN ROKEBERG further stated the legislature debated and held hearings on HB 235 last year, which would have basically stopped any potential retail wheeling because of a very high standard contained in the legislation, which in his opinion, essentially would have fundamentally been impossible to reach. He said the key area around the state is the apparent desire on the part of Chugach Electric Association to be able to provide retail competition for the Municipal Light and Power in the Anchorage area. He noted there's been some proposed legislation to undertake some types of statutory changes in the Senate and it's his opinion this area needs to be researched further. Based on his studies of the issue, he has determined that in the opinion of legal counsel, the Alaska Public Utilities Commission (APUC) and the attorney general of the state of Alaska, the APUC does have the power to grant competition and certificates of convenience for competition in Alaska. He remarked the committee may hear testimony to the contrary about the ability of the APUC to do that. Nevertheless, currently Chugach Electric Association has endeavored to supply power in the area of ML&P and there's a current docket before the APUC on the issue. He said, "The important thing to think about and remember about retail restructuring and what this means to retail competition is, as inviting as this is for a very free market-type of individual philosophically, such as I am, is that we will ... I believe that we need to take down some barriers to provide a (indisc.) of a free market place to potentially lower some of the costs to the consumers of the state. On the other hand, Alaska's very unique of all 50 states - or at least 49, or for the south 48 - inasmuch as we do share with Hawaii uniqueness - we're not on a national grid. We're not connected with the other grids for wholesale receipt of power and ability of an electrical retailer to be able to take power and move it from one area to (indisc.) to supply power along the power lines in a particular location. That's unique." CHAIRMAN ROKEBERG pointed out that Alaska's Senator Frank Murkowski is the Chairman of the Committee of Energy in the U.S. Senate which has the oversight and responsibility to move on national legislation regarding this issue. He believed that Senator Murkowski was waiting for the various 50 states in the union to take up the matter and provide some direction for the national policy. He asked committee members to give their attention to this particular issue because it's of major importance to the economic well-being of the state. Number 1215 REPRESENTATIVE RYAN commented that he, too, has done a lot of research on this issue and comes from a free market standpoint, but as Chairman Rokeberg said, Alaska is a horse of a different color. He said if Chugach Electric is allowed to move in and cherry pick Municipal Light and Power, the people in Anchorage who are not (indisc.) Chugach will have to pay the infrastructure costs for the municipal light and power and when the cherry picked customers are gone, those costs will rise appreciably. He said there doesn't seem to be a way to factor this in, and he wondered who will pay for the lights, poles, generators and the rest of the debt service while someone else is taking the cream off the top. He personally didn't see an equitable solution to the problem and so necessarily, it's going to be a hard sell to convince him this should be allowed to happen. In fact, conversely, he personally would say the APUC should be instructed to ensure that it doesn't happen. The situation is ripe for Chugach Electric to do a possible takeover of Anchorage Municipal Light & Power (AML&P) simply by taking the cream off the top, lower the price, then drive the costs up for AML&P and Chugach Electric could take it over at their price, thus decreasing the competition. Number 1314 CHAIRMAN ROKEBERG pointed out the current phenomena called "resalers" and these activities are occurring right now without real regulatory control or any statutory framework for it. He added it's important to keep in mind what's happening in terms of technology. One is that right now, the (indisc.) corporation will deliver to a job site a fully integrated generator system with a gas fired turbine that will be capable of providing the power to small business operations like McDonald's free standing restaurants, et cetera, which basically allows the business to not hook up to the local utility. Additionally, in the Glennallen area, there are electrical generations with even waste heat elements from diesel powered type stations providing electrical and (indisc.) heat to individual businesses. Number 1396 REPRESENTATIVE RYAN pointed out that Representative Barnes' brother works for a company in Tennessee who receives eight or ten bids in the mail for a certain amount per kilowatt from various entrepreneurs, some of whom wouldn't recognize a generator if they saw one, but they buy power from wholesale lots and resell it. It's a pretty small marketplace, but it's high volume so there's quite a bit of money made on it. In his opinion, it's important to take a look at the infrastructure costs. Number 1455 CHAIRMAN ROKEBERG noted there were a number of individuals wishing to testify. He asked Eric Yould to come before the committee to present his comments at this time. Number 1465 ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative Association Inc. (ARECA), said ARECA is the trade association that represents the electric utility industry in the state of Alaska. He noted that Chairman Rokeberg had addressed where the industry is today, and he would add a few remarks on where Alaska stands in terms of other states and what's being done. Number 1530 MR. YOULD said, "Everybody knows that we've seen deregulation at the gas line industry, airlines, telecommunications and we've seen some quantum leaps in the technology associated with telecommunications. I'll leave it up to some of the other utility managers that are on teleconference today to discuss the viability of some of the electrical generation options that we're going to see in the future. There will be some break throughs, but I think we'll find that they're going to be much slower in coming than what we've seen in the telecommunications industry, where we've seen fiber optics and cellular technology brought to the fore. We're still basically a hard wire technology with feed stock and heavy (indisc.). So, we'll see some efficiencies, but we're not going to see the quantum leaps that we've seen transform the telecommunications industry. Nevertheless, Congress is very interested in seeing deregulation in some form come to the United States, and as a matter of fact, they have been working on it themselves for a number of years. It had been hypothesized that at least two years ago, some form of electric utility deregulation would have passed Congress mandating some form of deregulation for all states, but that still hasn't happened and it's probably not going to happen this year either. Be that as it may, with the prospect of deregulation coming along, the various states have attempted to address the issue over the years so that they will be ready when the federal legislation ultimately comes." MR. YOULD pointed out that ten states - generally with high cost power - have passed some form of deregulation law. Nine states have basically required their respective public utilities commission implement some form of deregulation with statutory guidelines passed by the legislature. Twenty-three states have embarked on - many of them for a number of years - the process that HCR 34 is attempting in the state of Alaska; that is, figure out how deregulation in their state is unique, how it would work and in what fashion it should be brought to their state. It is his understanding there are nine states doing nothing on deregulation at the present time. So the state of Alaska, despite the fact that many of the other states have been working on this for a number of years, is really just now getting into it and in some respects, there's some valid reasons for that. MR. YOULD further stated in the Lower 48, 75 percent of the electric utility generation comes from investor-owned utilities. Those utilities are in the business of competing. They have a very integrated electric transmission grid system throughout the Lower 48 with multiple providers of electricity and major power marketing entities that can move power around the United States. The state of Alaska on the other hand, has a very weak inter-connected railbelt system and there's virtually no inter-connection in rural Alaska. Within the railbelt area, there are three major providers - Golden Valley Electric, Chugach Electric and Anchorage Municipal Light and Power. Also, unlike the Lower 48 where 75 percent of the power comes from investor-owned utilities, despite the fact that Alaska has some extremely good investor-owned utilities in the state of Alaska, only 9 percent of our generation comes from investor-owned utilities. The rest - or 91 percent - comes from consumer-owned utilities; either municipal or cooperative. So in many respects, we're already the owner of the resources that we're using to generate power and would like to believe their main incentive is to provide the lowest possible costs of power for consumers. MR. YOULD said be that as it may, because of the desire to see competition in the Anchorage area, he would have to say the prospect of deregulation has come to Alaska. Not only that, in August, Senator Murkowski addressed the electric utility industry and basically said it's coming on a national basis and he strongly urged the electric utility industry to craft what deregulation should look like for the state of Alaska and having done that, he could work with that to make sure the federal legislation will complement Alaska's prerogatives. Number 1710 MR. YOULD explained that as a result, ARECA's board of directors had a policy planning discussion the previous fall after several attempts to come up with some sort of consensus on what everyone wanted in the area of deregulation, and adopted a single resolution, a result of 11 different options, that reads as follows: Introduce legislation which reaffirms exclusive service areas for electric utilities for the immediate future, that also contains legislation resolutions forming a blue ribbon committee composed of legislative and electric utility representatives which would be directed to investigate whether, and if so, under what circumstances wholesale and retail competition is in the best interest of consumers in the state of Alaska and report back its findings and to draft legislation for introduction to the legislature by the year 2000. MR. YOULD said the resolution was adopted on a vote of 18-1; Chugach Electric was the dissenting vote because they would still like to proceed into deregulation immediately. MR. YOULD concluded that HCR 34 sets up a legislative subcommittee - it's different from ARECA's resolution in that they would like to have utility representation on the proposed joint committee. He encouraged the establishment of a subcommittee in which the utility industry would have more access to the committee. In addition, HCR 34 establishes a 20-month period of time to address what is a very complex issue - an issue to which other states have dedicated two, three and four years. He said those are the two primary differences in the resolutions; a third difference is the purpose of the subcommittee recommended by ARECA would be to look at under what circumstances, and if deregulation is even appropriate for the state of Alaska. He remarked that it is a very complex issue and individuals appointed to the proposed joint committee will have to deal with new buzzwords like "market power," "reliability," "uniform standards and information," "predatory pricing," "cherry picking," "universal service," "standard costs," "tax exempt status of financing" and "unregulatory monopolies." He said the utility industry is prepared to take a hard look at restructuring and wants to ensure that all consumers benefit from restructuring; not just those with economic clout. MR. YOULD advised committee members the general manager of the Ketchikan Public Utilities was unable to attend this hearing and had requested that Mr. Yould distribute his letter supporting HCR 34. REPRESENTATIVE COWDERY referred to Mr. Yould's statement that Chugach Electric had been the one dissenting vote and asked if everyone had equal voting; not based on the number of people supplied. MR. YOULD affirmed that. He said each utility has one vote, probably to the chagrin of those utilities with substantially more customers. Number 1913 CHAIRMAN ROKEBERG explained the reason the legislature didn't select the year 2000 is because this is an important issue and the fact is, this committee, as well as the Senate Labor & Commerce Committee has been working on this issue for a couple years already. Number 1965 CHAIRMAN ROKEBERG thanked Mr. Yould for his testimony and asked Don Edwards from Anchorage to testify at this time. Number 1980 DON EDWARDS, General Counsel, Chugach Electric Association, testified via teleconference from Anchorage and said he'd like to address two general areas. First is the respectfully suggested changes to HCR 34 and secondly, to address some of the previous comments. He noted that Mr. Reinwand was attending the hearing and had a couple of suggested amendments for HCR 34. He stated Chugach Electric's position is that no additional legislation is required because it is their view the customers already have the right to choose; that is to say the legislature has never taken away the right of customers to choose their electric supplier. And so whether or not legislation is required depends on whether an individual agrees with that view or not. He said that question has been posed to the commission. He explained that Chugach Electric Association feels this is very important. Therefore, the substance of the first amendment suggests the committee ask the commission to move on those matters pending pertaining to competition. He was of the opinion the joint committee would have a difficult time accomplishing its goals until it is determined exactly how the commission feels about its own authority; specifically, has the legislature acted to prohibit competition already or not. If the commission takes the position that the legislature has already prohibited competition - unless until the APUC authorizes it - then the legislature will have to consider whether or not it wants to change legislation to make it clear that competition is not prohibited. If, on the other hand, the commission's decision is the legislature has never prohibited competition, the joint committee will either need to stop competition before it gets going or by explicit legislation. He pointed out this is the basis for the suggested changes on HCR 34. Additionally, he referred to page 2, line 10, and recommended deleting "whether and how" and insert, "any additional legislation needed". The wording of the final resolve would then read: "Further resolved that the joint committee shall provide to the legislature written recommendations on any additional legislation needed to implement electric utility restructuring in Alaska." This would leave it open for the joint committee to respond to whatever view the commission has of its authority under existing legislation. CHAIRMAN ROKEBERG said he didn't necessarily agree with Mr. Edward's last suggestion because he felt it was broad enough for the committee to do whatever it deems necessary. Number 2233 MR. EDWARDS further said, "If I might I'd like to shift to the second portion of my testimony just briefly to address the cherry picking issue because I think it's a critical issue - everyone I've talked to - not everyone, but nearly everyone initially had their concern about cherry picking and I think it's a legitimate concern. But let me tell you why, at least why we at Chugach do not think it's a problem. It's only a problem if you don't allow all customers to have a choice. If you allow all customers to have a choice, then it's not possible for the problem to develop that Representative Ryan described. If there are -- let's just assume that one utility is successful at cherry picking another utility's large customers and then if that utility that has lost the large customer attempts to raise prices to the remaining customers, those customers will also leave. So it will not be possible to raise those prices. Now, if there in fact are stranded investments that need to be dealt with, the commission is fully empowered to deal with that issue and we're prepared to make suggestions to the commission on how they might deal with that. It's entirely possible that Chugach might have stranded investments in that event - we don't really know. Although we are very clear on the idea that stranded investments must be truly stranded and they must be stranded as a result of the competition and there should be no game playing there to try to shift costs on the customers that don't belong. If you want local utilities - that is utilities in Alaska to survive, we feel very strongly that it's important that we all be given a chance to compete. Now we recognize that most - in fact all the other utilities that we've come across - disagree with us on that. But we feel very strongly that if we're going to learn to compete, then compete so that we can meet the competition that is already occurring in Anchorage and is likely to intensify as restructuring develops. We feel that we need to have the opportunity to learn how to do that and the only way to do that is to begin competing. I want to clarify that Chugach has never presumed to tell anyone outside the railbelt (indisc.) how they should do anything and we've always attempted and we've always been willing to let the competition at least (indisc.) to Anchorage and certainly have not made any presumptions to tell people in outlying areas that are not inter-connected to the grid how the competition should or shouldn't draw on their system." MR. EDWARDS agreed that Alaska is different, but he said it's different because it's much simpler here. He said, "We have a couple customers in ML&P service territory that requested service. It's a relatively simple matter to serve them - it's not complicated by poles of electricity or a map of an inter-connected grid across the entire western half of the United States or anything like that. We have a thin, small system that is very simple to understand and it's very simple to (indisc.)." MR. EDWARDS said the committee is likely to get input and the people who are unhappy about this or made uncomfortable about this are the other utilities, which is understandable. Chugach Electric Association certainly isn't comfortable with change, but they are approaching and dealing with the changes coming into the industry differently. He said the committee will hear almost exclusively from other utilities, but Chugach Electric Association requests committee members not to forget the recent poll results they conducted. Arguments can be made about whether or not the questions were correct, but by any measure - 92 percent of the Anchorage population of the whole believed they deserve a choice and Chugach Electric agrees with them. Number 2167 CHAIRMAN ROKEBERG thanked Mr. Edwards for his comments. REPRESENTATIVE COWDERY asked Mr. Edwards if some type of authority should make the choice on the cherry picking decision. MR. EDWARDS replied that Chugach Electric believes quite strongly that to the greatest extent possible, circumstances should be set up so that government entities or authorities are not determining who gets to buy from whom. In their view, the better choice is to develop a system that has good incentives and which allows customers to choose and make economic choices which then businesses respond to. REPRESENTATIVE COWDERY asked if Mr. Edwards was implying there was no need for the Alaska Public Utilities Commission to exist? MR. EDWARDS replied, "No, I think there's a role for the [Alaska] Public Utility Commission and in fact, I think the legislature has already set out by statute exactly what that role should be. What the legislature has said is that if competition occurs - in other words if it's already going - and if the commission finds that it's not in the public interest, then the legislature has already empowered the commission to step in and take measures to deal with that. We do not believe that the legislature has issued a blanket prohibition against competition and that's what the argument is about that's in front of the commission right now. So, we do believe that there's a role for the commission - in particular there's clearly a role for the commission in setting rates. And that's exactly what we've asked the commission to do with respect to ML&P. The reason we aren't able to serve MLP customers right now is because ML&P will not allow us to have access to their customers and will not establish a rate for us to get to those customers over their system. We're not proposing any kind of duplication of physical plant; we're simply proposing that we pay (indisc.) a fair price. Again, which is a relatively simple matter to figure out." TAPE 98-44, SIDE B Number 0010 CHAIRMAN ROKEBERG .... interpretation of Alaska statute by prohibiting competition any where within that particular boundary." He asked if that was a fair description or had Chugach Electric changed its approach since that conversation. MR. EDWARDS said Chugach Electric is willing to go with a result that results in competition just within the Anchorage area; specifically, within Anchorage Municipal Light and Power and Chugach Electric Association's existing distribution service territories. Philosophically, Chugach Electric believes that competition is the best way to go and believes that it's better for the utilities if all are exposed to that competition sooner rather than later. CHAIRMAN ROKEBERG expressed his appreciation to Mr. Edwards and said he looks forward to working with him on this issue in the future. He asked Robert Grimm to present his remarks at this time. Number 0053 ROBERT GRIMM, President, Alaska Power and Telephone Company (AP&T), came before the committee and said AP&T is a small investor-owned utility and a contributing member to ARECA, which means they receive benefits from ARECA, but don't vote. Alaska Power and Telephone serves 28 communities from Allakaket down to Hydaburg; primarily along the eastern boundary of Alaska. These are small communities that are electrically isolated from one another which is something that should be looked at very carefully if there's another utility company thinking of competing with AP&T. He said this is going to be a difficult decision on how, where, when and if competition is allowed in the electric utility. He supports legislation to create the joint committee because it is his belief that's what needs to be done to get enough knowledge on the table to be able to make an informed decision. Number 0105 CHAIRMAN ROKEBERG noted that AP&T is rare in terms of being an investor-owned utility and inquired as to the number of customers served by AP&T. MR. GRIMM replied about 6,000. CHAIRMAN ROKEBERG inquired if it was mostly diesel generated. MR. GRIMM said it was mostly diesel, but they have two hydros - one on Prince of Wales and two in Skagway. CHAIRMAN ROKEBERG thanked Mr. Grimm for his testimony and said the committee would now hear from Mr. Roberts. Number 0133 JIM ROBERTS, General Manager, Cordova Electric Cooperative, testified via teleconference from Cordova in support of HCR 34. He echoed the comments of Eric Yould and Bob Grimm. He said Cordova Electric Cooperative is an isolated system, predominately diesel generation with one small hydro and working on getting another one built. He said their industry is fishing based and they are concerned about the possibility of another utility coming in under this restructuring and being able to cherry pick their large loads. In his opinion this is something the committee needs to address, especially in rural areas. He noted this is definitely a concern of the rural consumers and was a topic of discussion at the recent annual meeting. CHAIRMAN ROKEBERG thanked Mr. Roberts for his testimony and expressed that he enjoyed visiting Cordova and speaking at the ARECA convention on this issue last August. He called on Robert Wilkinson to present his remarks at this time. Mr. Wilkinson was unavailable and had requested Colleen Granger to read his statement into the record. Number 0205 COLLEEN GRANGER, Manager of Member Services, Copper Valley Electric Association, testified via teleconference from Valdez. She read the following statement on behalf of Robert Wilkinson: Thank you, Chairman Rokeberg and members of the committee for allowing me to testify today on this very important issue. As I said, my name is Colleen Granger and I am speaking for Robert Wilkinson who is the general manager of Copper Valley Electric. Copper Valley is a rural electric cooperative serving approximately 3,200 customers in a geographic area roughly the size of West Virginia. We began preparing for competition in November of 1996 when we adopted a new issue statement which is to be the power supplier of choice within our service territory. We know being the chosen provider means being the low cost provider and since adopting our new mission, we have filed a rate change with the Alaska Public Utilities Commission to bring our annual revenue requirement down by $800,000 which is a reduction of approximately 7 percent. Basically, we have and will continue to inject the profit motive into our nonprofit electric cooperative so those profits can be in the form of lower electric rates. We are very concerned, however, as to what impact industry restructuring will have on our efforts to maintain competitive rates. Restructuring is sure to create opportunities for some and unless done carefully and correctly will surely create hardships for others. Alaska's electric cooperatives have faithfully and capably served this state for over 50 years. As we travel the road toward industry restructuring, we must be cautious and deliberate in our actions so as not to upset the carefully balanced system which has been built over these years. Alaska is unique among the nation's utility systems and Alaska's cooperatives are also unique. Restructuring is an extremely complex issue which must be carefully studied and thoroughly understood to ensure financial and electrical impacts to customers are known before they occur. I would like to commend the legislature for the foresight in forming this committee to study the issues before making a decision. I am concerned that the time provided for in HCR 34 for the committee to do their work may be inadequate to properly address the many complex issues surrounding restructuring in Alaska. At a minimum, any restructuring legislation must address stranded investment, cost recovery, reliability, safety standards, rate impacts to all utilities and all customer (indisc.), necessary customer education and an adequate transition period into the new competitive environment. We urge the legislature to proceed carefully and diligently to ensure that we proceed in a thoughtful manner and that the best interest of all Alaskan consumers are preserved. Thank you very much, folks. CHAIRMAN ROKEBERG thanked Ms. Granger for her comments and called upon Norm Story to testify at this time. Number 0330 NORM STORY, Manager, Homer Electric Association, testified via teleconference from Homer in support of HCR 34. He didn't feel it was necessary to expand on the previous comments regarding the uniqueness of Alaska and why it's important to be very careful before employing competition within the state. He said Homer Electric Association provides electrical service to approximately 17,000 members on the Kenai Peninsula. Homer Electric is very concerned about opening electric competition within their service territory without first closely studying its effect on the majority of electric users which could result in increased rate. He said Homer Electric Association believes that HCR 34 provides for such a study, but would like to see more time allowed for the study. CHAIRMAN ROKEBERG pointed out that by bringing a report back to the first session of the Twenty-First Legislature, it's possible that it could be finalized in the second session if there are any statutory requirements to be changed. He asked Robert Hansen to present his remarks at this time. Number 0417 ROBERT HANSEN, Chief Financial Officer, Golden Valley Electric Association (GVEA), testified via teleconference from Fairbanks in support of HCR 34. He said Golden Valley Electric Association serves about 36,000 consumers. The GVEA recognizes that restructuring is a very complex issue and as it has been pointed out, Alaska is not like the Lower 48 by having limited generation resources and providers limited inter-connection, and Alaska has primarily cooperatives and municipals. Most of their concerns have already been addressed; primarily the stranded cost issues, liability issues, access issues and certainly cherry picking. He thanked the committee for the opportunity to speak in support of HCR 34. Number 0462 CHAIRMAN ROKEBERG called on Charles Walls to present his testimony at this time. Number 0486 CHARLES WALLS, President, Alaska Village Electric Cooperative, testified via teleconference from Anchorage in favor of HCR 34. He said it is imperative the legislature carefully consider all the ramifications of restructuring the electric utility industry. He said, "You've heard quite a bit of testimony about some of the major concerns of some others that are a little bit unique to the area I serve which is village Alaska is perhaps just an amplification of what you've heard. When you have just one or two large customers and a handful of houses in a typical village that's totally isolated from anywhere else, it becomes very apparent that the feasibility of that electric utility could be very easily destroyed by another (indisc.) coming in and cherry picking, particularly if that competitor is not willing to take on the social responsibility that a public utility has to bear - that is, where we are obligated to provide electric service by law, some of our competitors don't want to carry that burden." He said if the issues are looked at, he believes the legislature will find that it doesn't make sense to open rural Alaska up to competition. He noted the telephone industry discovered that same thing when going to deregulation of telephone service. In fact, because of these small, unprofitable service areas, that industry created what's referred to as a universal service fund to ensure that everyone would have access to affordable service. He said those are some of the issues faced in rural Alaska, particularly village Alaska, and those complex issues need some study before restructuring. He reiterated his support for HCR 34 and encouraged committee members to take some time to focus on this important issue. CHAIRMAN ROKEBERG asked if there were any questions of Mr. Walls. Hearing none, he called on Meera Kohler to present her testimony. Number 0599 MEERA KOHLER, Representative, Anchorage Municipal Light & Power, testified via teleconference from Anchorage. She said the introduction of HCR 34 comes at a very momentous time, especially in light of the very recent introduction of the President of the United States' Comprehensive Electricity Competition Plan. She offered to make copies of that plan available to committee members, if necessary. She said item 1 of the President's plan encourages states to implement retail competition on a sensible mandate. It specifically urges states to carefully craft a plan to (indisc.- coughing) retail competition would best be implemented in each state. She said the uniqueness of Alaskan conditions must be taken fully into consideration before any sweeping measures are taken to rush the state into retail competition. It must be recognized that any assets that might become stranded through deregulating the industry belong already almost entirely to the people of the state of Alaska; either cooperative members or municipal taxpayers. It must also be noted that despite a single utility's (indisc.) call to immediately open the Alaska urban electricity market to competition, the (indisc.) of retail wheeling is not yet in place. Our fledgling transmission system that ties the railbelt utilities together is still undersized and controlled by a single utility. Until that transmission grid is operated by an independent operator, the utilities cannot possibly compete for retail customers. MS. KOHLER continued that as this committee convenes to address the enormous task that lies ahead of it, the municipality of Anchorage urges that provision be made to include industry representatives into the deliberative process. The municipality also urges the committee allowed the flexibility to take the necessary time to fully address the many complexities of the issues involved. It must be noted that the wholesale wheeling mandated by (indisc.) Act of 1992 is not yet in place in Alaska six years later. California which was the first state to implement retail wheeling and has only just started, has taken over four years to reach this stage and numerous glitches still remain to be worked out. It's imperative though to recognize that Alaska was the forty-ninth state to join the union for good reason. Our conditions - geographic, demographic and climatic are unique. Our population is small and widely dispersed. We have minimum transportation routes to use, both land based and energy wise. When a 60-megawatt generator coughs, the frequency from Fairbanks to Anchorage to Homer takes a hit. Alaska's problems and solutions have always been unique to our state. She urged the committee to give this extremely critical issue their closest scrutiny and fastest solution that will serve all Alaska's electric consumers well now and in the future. Number 0721 CHAIRMAN ROKEBERG remarked the reason why the scope of membership of the joint committee hasn't been broadened in the resolution is that in order to do so, it would incur a fiscal or financial obligation to the communication and transportation of those members. He fully expected that everyone wishing to testify or having input into the committee would be more than welcome to participate. He asked if there was anyone else wishing to testify on HCR 34. Hearing none, he closed public testimony and called an at-ease at 4:23 p.m. CHAIRMAN ROKEBERG reconvened the House State Affairs Committee at 4:35 p.m. He directed committee members attention to the proposed committee substitute. Number 0792 REPRESENTATIVE COWDERY made a motion to adopt proposed committee substitute, Version 0-LS1639\B, Cook, 4/6/98, as the working draft, CHAIRMAN ROKEBERG asked if there was any objection. Hearing none, that version was before the committee. He explained the difference between the two versions is the language on lines 10, 11 and 12 of Version E has been deleted. Number 0824 REPRESENTATIVE TOM BRICE made a motion to amend the language on page 2, line 5, to read following committee, ", and ARECA shall appoint an equal number of participants from their membership and they will be required to cover their own costs." He said the idea is to have ample representation from a wide range of people involved with the issue to provide the legislature with grounding in some of the realities of the industry. CHAIRMAN ROKEBERG asked if there was objection. REPRESENTATIVE COWDERY objected for discussion purposes. He asked Representative Brice what he envisioned the total membership to be. REPRESENTATIVE BRICE said it would be completely dependent upon the presiding officers' determination. For example, if there's five members from each body [House and Senate], then there would be ten appointments from ARECA's membership. He reiterated his concern that there be equal representation on this joint committee to include people from the industry who deal with the day-to-day issues. Number 0928 REPRESENTATIVE COWDERY expressed concern about getting a quorum. He believed that by forming a joint committee, members of the industry would show up and participate at their own expense. CHAIRMAN ROKEBERG agreed with Representative Cowdery's comments with regards to the interest of the industry and participation in the testimony to provide the necessary information for the committee to make any recommendations to future legislatures. He said, "Point in fact is, for the record, the reason we have an indeterminate number here is that because it is an election year and this is a very important issue, I'm not sure how many people would be available to serve and therefore don't want to tie the presiding officers to a specific numeric plateau in which they may or may not be able to achieve of people interested in serving on this committee...." REPRESENTATIVE COWDERY remarked that perhaps the committee should include members of the minority. REPRESENTATIVE BRICE said the make up of standing committees is based on the Uniform Rules and it may be possible to figure something out, using the Uniform Rules as a guideline. REPRESENTATIVE COWDERY remarked he did not have any problem with that, but was of the opinion the committee should be kept to a small number of members while still allowing industry members to participate in the process. CHAIRMAN ROKEBERG asked if the objection was maintained to the proposed amendment? He objected to the amendment, also. Number 1096 REPRESENTATIVE BRICE withdrew Amendment 1. Number 1098 REPRESENTATIVE BRICE made a motion to adopt Amendment 2 on page 2, line 8, to delete "First" and insert "Second" to provide additional time for the committee to do its work. CHAIRMAN ROKEBERG objected. Number 1139 REPRESENTATIVE BRICE said this amendment speaks directly to one of the recommendations made. He maintained that much of the attention and focus of legislators is going to be drawn elsewhere during this upcoming interim and the joint committee is going to be hard pressed to devote the attention this issue needs. CHAIRMAN ROKEBERG said his comments in opposing the amendment are very practical in nature. He agreed the amendment was consistent with one of the recommendations by ARECA, but the reason for his disagreement with the amendment is because there will be an election which means a new legislative body when the Twenty-First Legislature reconvenes and some members of the committee may not even be members of the legislature. And therefore, the presiding officer will have to reconstitute the committee which may be somewhat problematic at best. Number 1234 REPRESENTATIVE BRICE remarked the flip side of that is perhaps the leadership of the legislative body may change and there will be no "buy-in" by the next leadership on this process and therefore no compelling desire or interest to take action on the joint committee's recommendations. He said everyone recognizes that it's too late to get any legislation or recommendations in this session, so any recommendations will have to go through a completely reorganized house. He felt it important the reorganized legislature should have buy-in to the process. He said it's going to be difficult either way. CHAIRMAN ROKEBERG asked for a roll call vote. Representatives Sanders and Brice voted in favor of the amendment. Representatives Rokeberg and Cowdery voted against the amendment. The motion failed by a vote of 2-2. Number 1360 REPRESENTATIVE BRICE made a motion to amend the language on page 2, line 10, following restructuring, insert "and under what, if any, circumstances it is appropriate". The last resolve would then read: "Further Resolved that the joint committee shall provide to the legislature written recommendations on whether and how to implement electric utility restructuring and under what, if any, circumstances it is appropriate in Alaska." CHAIRMAN ROKEBERG objected for discussion purposes. He asked Representative Brice to explain the overall goal of the amendment. REPRESENTATIVE BRICE said there has been public testimony indicating that it may not be appropriate to do a wholesale restructuring in Alaska. It may be appropriate to have restructuring in the Anchorage Bowl for example, but not necessarily in the rest of the state. The goal is to clarify that given the diversity in the electrical utilities within the state, some places it may be appropriate in some places while it may not be in others. REPRESENTATIVE COWDERY noted that Representative Brice had indicated it might be in Anchorage, so should the two utilities in Anchorage make the determination or should all the utilities be involved in the determination. REPRESENTATIVE BRICE suggested that would be the function of the joint committee. CHAIRMAN ROKEBERG said he understood what Representative Brice was attempting to do, but he felt the charge to the legislature is clear and the amendment would make the legislation more vague. He felt the "what, if any" was covered in the "whether or how" is .... REPRESENTATIVE BRICE said, "...I was saying I wasn't quite sure - I just saw the CS [committee substitute] when we were coming in, so I was wondering how I could encompass that as to -- there's another factor here, not only on just whether and how, but I think that those relate to -- I mean, is it possible? Yes, it is possible. Is it appropriate? We don't know. If it's practical and it's appropriate - even beyond practicality -- so that third factor .... CHAIRMAN ROKEBERG said he would maintain his objection and asked for a roll call vote. Representative Brice voted in favor of Amendment 3. Representatives Rokeberg, Sanders and Cowdery voted against Amendment 3. Amendment 3 failed by a vote of 1-3. Number 1684 CHAIRMAN ROKEBERG called an at-ease at 4:53 p.m. TAPE 98-45, SIDE A Number 0010 CHAIRMAN ROKEBERG called the meeting back to order at 4:54 p.m. REPRESENTATIVE BRICE moved Amendment 4 on page 2, line 3, following joint committee, insert "in accordance with the Uniform Rules,". Page 2, line 3, would then read, "Representatives and of the Senate to serve on the joint committee in accordance with the Uniform Rules, and that the Speaker of the". CHAIRMAN ROKEBERG asked if there was objection to Amendment 4. Hearing none, Amendment 4 was adopted. Number 0047 REPRESENTATIVE COWDERY made a motion to move CSHCR 34, Version 0- LS1639\B, Cook, 4/6/98, as amended from committee with individual recommendations and attached zero fiscal note. REPRESENTATIVE SANDERS objected. It is his position that HCR 34 should be held in committee for further discussion at the next meeting. CHAIRMAN ROKEBERG asked for a roll call vote. Number 0192 REPRESENTATIVE BRICE referred to the objection, and said he did not intend to move this bill out of committee at this time because he believed issues had been raised that needed to be addressed; e.g., the time line, industry representation, et cetera. Number 0251 CHAIRMAN ROKEBERG requested a roll call. Representatives Rokeberg and Cowdery voted in favor of moving the bill out of committee. Representatives Sanders and Brice voted against the motion. Therefore, the motion failed by a vote of 2-2.
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