Legislature(2005 - 2006)BUTROVICH 205
01/26/2005 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB32 | |
| SJR2 | |
| SB69 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SJR 2 | TELECONFERENCED | |
| *+ | SB 32 | TELECONFERENCED | |
| *+ | SB 69 | TELECONFERENCED | |
SB 32-WATER/SEWER/WASTE GRANTS TO UTILITIES
SENATOR THERRIAULT, sponsor of SB 32, said it was introduced to
correct a problem that manifested itself with the sale of the
Fairbanks Municipal Water System.
He said The State of Alaska provides a water system grant
program specifically to keep water utility rates affordable and
explained:
The program is authorized through AS 46.03.030 and
available funds are accessible through grant
applications. However, because of changing patterns of
ownership, not all state regulated public utilities
under the Regulatory Commission of Alaska (RCA) are
now eligible for those state grants. The Fairbanks
water utility became ineligible to apply for these
grants when it was sold to a private entity. SB 32
amends current law to accommodate the growing trend of
publicly regulated, privately-owned, utility systems
while remaining consistent with the law's original
intent of keeping safe water affordable to the public.
With the changes to AS 46.03.030 made in SB 32, all
public utilities subject to the burdens and associated
costs imposed by the state RCA regulations will now be
eligible to apply for grants as currently established
under AS 46.03.
3:39:13 PM
SENATOR SEEKINS arrived.
3:39:24 PM
SENATOR THERRIAULT iterated that the Fairbanks water utility
sale into private ownership made the City of Fairbanks
ineligible to apply for the grants.
The policy question for us as legislators is if the
federal government makes money available to assure
that the broadest number of people possible have a
safe and affordable source of drinking water, then
should the ownership structure of the utility
determine whether the people can apply for those
grants or not. My contention to you is that the
ownership structure shouldn't automatically make that
group of citizens in the State of Alaska ineligible.
3:40:15 PM
I know there is some question with regard to 'Well, if
a privately held entity is able to seek a grant, get a
grant, expand facilities or update equipment, should
that private entity be able to enrich the pocketbooks
of its owners through the future sale of the entity,
then, to somebody else?' But the way that the rate
structure looks, RCA would not allow a rate that would
allow a new owner to recoup the cost of buying that
transparent asset. So, when a grant is given and the
money is invested into the system that is placed on
the books as a transparent asset. If the utility is
then sold to somebody else, the buyer is only going to
pay a price that he can then charge a rate to recoup
his money. If RCA does not allow you to charge a rate
for that part of the infrastructure that was put in
place through a grant, then the owner's not going to
pay that price. He is only going to pay for that
portion of the assets that he can actually charge a
rate for to recoup his purchase prices.
SENATOR THERRIAULT noted correspondence from Nan Thompson,
former RCA chairperson, that supported his statement.
CHAIR WAGONER asked how that would be tracked.
SENATOR THERRIAULT replied that he wasn't sure. Department of
Environmental Conservation (DEC) might be able to answer how
utilities indicate equity ownership on the books.
3:42:54 PM
He said an inadvertent problem with the wording was created for
the City of Ketchikan and that proposed Amendment 1 addresses
it.
3:43:12 PM
SENATOR SEEKINS asked if there was an accounting when the
Fairbanks utilities were sold to a private entity that said it
couldn't sell the assets that were granted to it.
SENATOR THERRIAULT replied that he didn't know, but the rate the
purchasing entity applied for couldn't include repayment for any
money it used to buy the grant portion of the asset.
SENATOR SEEKINS mused, "So, if it goes from public to private,
they couldn't do it. So, we can assume that going from private
to public they couldn't, as well."
3:44:44 PM
SENATOR THERRIAULT replied he understands that as ownership of
transparent assets float along, no one can put together a rate
that recoups money for infrastructure that has been paid for by
a grant.
3:45:07 PM
SENATOR SEEKINS responded that the grants are for the benefit of
the end users, the citizens of the state. He asked if Power
Equalization Program funds are channeled through private
utilities for the benefit of the end user.
SENATOR THERRIAULT replied that he didn't know how those grants
work.
SENATOR SEEKINS said it appears to him that the intent is to try
to lower the cost for the end user whether it is a public or a
private utility.
3:45:47 PM
SENATOR STEDMAN offered Amendment 1.
24-LS0290\A.1
Craver
3/3/05
A M E N D M E N T
OFFERED IN THE SENATE BY SENATOR THERRIAULT
TO: SB 32
Page 1, line 1:
Delete "regulated"
Page 2, line 17, following "if":
Insert "(1)"
Page 2, line 18, following "AS 42.05":
Insert "; or
(2) the utility is owned and operated by a
political subdivision of the state that is a municipality"
He explained that it doesn't modify the ability that
municipalities currently have from entering this program, but
keeps the playing field level by including private utilities
that were once public and then sold into the private sector.
3:47:19 PM
SENATOR ELTON objected to ask more about the Ketchikan
situation. He also asked if deleting "regulated" from the title
expanded the pool of potential applicants for the grant program.
3:48:06 PM
SENATOR STEDMAN responded that Ketchikan is included with other
municipalities that have enterprise funds. This bill would allow
a lot more communities to become eligible to apply for grants.
He thought Juneau has an enterprise fund for its utilities.
3:48:53 PM
SENATOR THERRIAULT said he understands that the problem comes up
with the word "regulated" and asked if that meant just
regulation by the RCA. Ketchikan is regulated by its own
separate public utility board. He didn't intend for it to be
precluded and this legislation clarifies that.
3:49:40 PM
SENATOR ELTON asked if deleting "regulated" expands the pool of
new applicants who want access to the grant funds.
3:50:20 PM
SENATOR THERRIAULT replied yes, the group that requests
regulation could expand, but this amendment was structured to
specifically take care of those entities that have their own
public utility board. Presently there are 23 water and
wastewater utilities in the state. That number could go up to
170, but he didn't expect that many real small utilities would
apply.
3:51:28 PM
SENATOR ELTON asked if adopting Amendment 1 would change the
fiscal note.
3:51:53 PM
SENATOR THERRIAULT replied that Amendment 1 doesn't solve the
department's potential fiscal problem of having a flood of new
grant applications. He was willing to work with the
administration to control the fiscal impact.
3:52:34 PM
SENATOR ELTON asked how much money has been available through
the grant program over the years?
3:53:02 PM
SENATOR THERRIAULT replied that the FY'06 budget appropriates
$11 million to the grant program. The bill doesn't guarantee
qualification for the funds, but it allows entities to turn in
an application, to have it scored and be evaluated with all
other applicants.
3:53:28 PM
SENATOR ELTON said the pie doesn't increase, but "You're going
to cut it into more slices is the likely result."
SENATOR THERRIAULT agreed that was correct.
3:53:59 PM
CHAIR WAGONER asked if there was further discussion on Amendment
1. There were no further objections and Amendment 1 was adopted.
3:54:14 PM
SENATOR GUESS asked if there might be unintended consequences by
having one utility that serves multiple areas getting a
different reimbursement rate than if it was getting a grant for
one of its specific areas - in reference to language on page 2,
line 4.
3:54:53 PM
SENATOR THERRIAULT said he didn't think a grant application
could be put in for a specific area - neither could he think of
a utility that would fall into the category of serving separate
and distinct areas.
3:55:07 PM
SENATOR GUESS asked if there was a reason language on page 1,
line 13, refers to municipalities and public utilities, but on
page 2, lines 4-11 "municipalities with" is deleted so that
language refers only to utilities. She was wondering if
"municipality or" should be deleted in (e) to be consistent with
language on page 2.
SENATOR THERRIAULT explained that language "municipality with"
means any ownership that was non-municipal would be excluded.
3:56:43 PM
SENATOR SEEKINS moved CSSB 32(RES) from committee with attached
fiscal notes and individual recommendations.
SENATOR ELTON objected to note that the city manager of
Petersburg, who has some experience with the program, opposes
the bill. He would be more comfortable with some kind of
communication from the Alaska Municipal League (AML) or a group
that recognizes organized municipalities on what the net effect
may be for them. He especially thought about the potential
diminishment of grants - their number and size - that may occur
across the board.
3:58:12 PM
CHAIR WAGONER responded that he discussed that letter with
Senator Therriault, but not with Senator Stedman, who represents
Petersburg. He pointed out that this bill goes to the Finance
Committee next and Senator Stedman has a seat on that committee.
The question could be asked there.
3:58:41 PM
SENATOR THERRIAULT commented that he understands Petersburg's
concerns, which are twofold. One is whether a private entity
could make a profit at the state's expense by having access to
these grants; but the RCA has assured the Legislature it would
not allow a rate for an entity to repay itself for something
that was constructed using grant fund money.
The second issue is more entities will potentially be in the
pool to compete for the same size pie. He is proposing to just
go back to the kind of participants that existed a few years
ago. He feels if government money (mostly federal) is available
to make a safe and affordable source of drinking water, the
ownership structure shouldn't preclude some people from
qualifying and some not.
4:00:53 PM
CHAIR WAGONER recognized that James Keen, RCA, was on line to
answer questions.
4:01:06 PM
SENATOR ELTON said he understands adding the Fairbanks utility
back, but the fiscal note says there are 193 other potential
applicants. "Did they have access to the grant fund in the
past?"
4:01:38 PM
SENATOR THERRIAULT answered that the total pool of applicants
would be larger under the new structure. However, he seriously
questioned whether every small trailer park would want to live
under RCA regulation on the off-chance that it might get a
grant.
4:02:19 PM
SENATOR ELTON said he didn't have the comfort level to support
the bill at this point.
4:02:56 PM
SENATOR STEDMAN said that the fiscal note would come under
scrutiny in the Finance Committee and the AML would have time to
have some input. He thought it would be impossible for entities
to profiteer off of the grants.
4:03:32 PM
CHAIR WAGONER asked how transactions are accounted for and how
that cost would be avoided being passed on to the user of the
utility system at a future date.
4:04:27 PM
COMMISSIONER JIM STRANDBERG, RCA, replied sale of a utility is a
commercial agreement between two entities. The regulators will
only allow the new owner to have a rate at a certain level based
on the depreciated book value of the infrastructure, less
contributions in AIDA construction. If the entity that purchased
the utility wanted it bad enough and paid a lot more than what
the book value was, that's its business. That would not be
allowed in the rate to be charged to the future ratepayer.
4:06:40 PM
SENATOR SEEKINS commented that he would vote for this bill
because it appears that people from 96 additional utilities,
public or private, will benefit without discrimination in
getting public funding for safe water. If the goal is to get
safe water to as many people in Alaska as possible, that's a
good public purpose.
4:07:46 PM
MS. KARA MORIARTY, President and CEO, Fairbanks Greater Chamber
of Commerce, supported SB 32 and the concept that all utilities
should be on the same playing field and be eligible to receive
state grant funds.
Currently, the only utilities that are eligible for
the grants are publicly owned and are primarily used
for infrastructure development and upgrades. Based on
regulations set forward by the Regulatory Commission
of Alaska, the shareholders and privately owned
utilities cannot generate a return on investment or
receive depreciation expense credits for any grant
funds they receive. Because of those regulations, the
only beneficiaries, then, of a privately-owned utility
to receive these grants would be the ratepayers, the
citizens of a community.
All utilities in Fairbanks are either owned privately
or by a cooperative. In essence, Fairbanks businesses
and residents are at a disadvantage compared to other
Alaska residents. One of the first questions we often
field at the Chamber from perspective businesses that
want to locate to Fairbanks or even those businesses
that are here and want to expand, is what is the cost
of doing business and utility costs are certainly a
major component of a business's operating costs....
She concluded by urging the committee to allow privately owned
utilities to be eligible for grants like other utilities across
the state.
4:10:53 PM
SENATOR SEEKINS renewed his motion to pass CSSB 32(RES) from
committee with individual recommendations and attached fiscal
note. Senators Stedman, Stevens, Dyson, Seekins and Chair
Wagoner voted yea; and Senator Elton voted nay. CSSB 32(RES)
moved from committee.
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