Legislature(1995 - 1996)
02/09/1995 09:10 AM Senate FIN
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* first hearing in first committee of referral
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SB 47 - APUC EXTENSION AND REGULATORY COST CHARGE
Testimony was presented by Josh Fink, Don Schroer,
Bob Lohr, Jimmy Jackson, and Dave Hutchens. The
bill was HELD in committee for scheduling on next
week's agenda.
SENATE BILL NO. 47
An Act relating to the extent to which the Alaska
Public Utilities Commission may exercise its powers
when regulating utilities; establishing a regulatory
cost charge on public utilities and pipeline carriers;
relating to the allocation of costs in hearings before
the Alaska Public Utilities Commission; relating to the
method by which utilities are exempted from and made
subject to regulation by the Alaska Public Utilities
Commission; relating to the monetary threshold for
regulation of certain kinds of utilities by the Alaska
Public Utilities Commission; extending the Alaska
Public Utilities Commission; relating to staggered
terms for members of the Alaska Public Utilities
Commission; and providing for an effective date.
Co-chairman Halford directed that SB 47 be brought on for
discussion. JOSH FINK, aide to Senator Kelly, came before
committee. He directed attention to a sectional analysis
prepared by Senator Kelly, sponsor, and a separate sectional
prepared by Legislative Legal Services. He explained that
SB 47 reflects reintroduction of SB 213 from the previous
legislature. It accomplishes two goals:
1. Extension of the Alaska Public Utilities
Commission
currently scheduled to sunset the end of June,
1995.
2. Reenactment of the regulatory cost charge that
expired
December 31, 1994.
Given the unknown and potentially serious ramifications of
expiration of APUC, SB 47 was introduced as consensus
legislation. All provisions have been extensively debated
and are either unopposed or the result of compromise by all
concerned parties, in the best interest of consumer
protection. SB 47 is almost identical to the version that
reached the House floor last May and failed to pass prior to
adjournment.
A separate bill including further APUC amendments has also
been introduced. It is Senator Kelly's hope that SB 47 will
remain unamended as it travels through the legislative
process.
Mr. Fink provided a review of the sponsor's sectional
analysis (copy on file in the SFC file for SB 47) and
highlighted the following provisions:
1. Sec. 1 replaces language granting the commission
"liberally construed" powers with language
allowing the commission to do "all things
necessary or proper to carry out the purposes and
exercise the powers expressly granted or
reasonably implied." The foregoing reflects
compromise language developed last year.
2. Secs. 2, 3, 10 and 11 reenact the regulation cost
charge
for utilities and pipelines. Reenactment does not
include sunset provisions. The RCC should be
considered when the commission "comes up for
sunset."
3. On Page 3, Lines 11-13, provisions adjust
allocation of
the RCC for electric utilities by subtracting the
cost of power from gross revenues.
4. On Page 2, Line 27 and Page 6, Line 4, the ceiling
on the
RCC for utilities and pipeline carriers is raised
from .61 % to .8 %. The RCC has never reached the
ceiling. If the cost of power is subtracted from
gross revenues for electric utilities, the ceiling
for other utilities must be increased or
sufficient program receipts will not be generated
to cover the commission budget.
5. Page 3, Lines 20-24 and Page 6, Lines 15-19,
contain language requiring the Dept. of
Administration to earmark regulatory cost
charge collection overages for possible
appropriation by the legislature for the
commission's next fiscal year, thus lowering
the RCC for that year. That charge is passed
directly to consumers and averages $10
annually, for all utilities.
6. Secs. 4, 5, 6, 7, 8, and 9 are the result of audit
recommendations. Secs. 4, 8, and 9 permit
subscribers of small utilities or utilities exempt
from regulation to petition for regulation under
the same procedures used by subscribers of a
regulated utility to petition for removal from
regulation.
7. Sec. 12 extends the sunset date for the commission
to
June 30, 1999.
8. Sec. 13 staggers the terms of commission members.
Two
terms presently expire at the same time. The new
provision will not impact the terms of current
commissioners.
9. Secs. 14 and 15 provide for new language enacted
in
Sec. 1 (changing language from "liberally
construed" to "reasonably implied") to become
effective July 1, 1996.
10. Sec. 16 provides an immediate effective date for
all
provisions with the exception of Sec. 1.
Senator Donley voiced concern over the above-noted language
change in Sec. 1, suggesting that it would lead to increased
litigation over the meaning of the new standard. Consumers
will pay the cost of that litigation through increased
utility bills. He then inquired concerning why the change
was made. Mr. Fink deferred to APUC staff. He briefly
referenced situations in which utilities felt the commission
overstepped its authority and made policy decisions beyond
its statutory mandate. Alternatively, other utilities were
pleased that the commission had authority to grant temporary
operating permits, a function for which it does not have
express authority. Compromise language is "a shade more
restrictive." Senator Sharp attested to the fact that
under "liberally construed," commission philosophy often
swung in accordance with the make up of the commission.
Administrative and court challenges are expensive.
"Necessary and proper" is better, particularly in light of
provisions which allow the commission to levy the RCC to
cover its budget expenses. Senator Rieger voiced support
for the more moderate language. Senator Donley cautioned
that new language appears "ripe with potential for
litigation."
Co-chairman Halford voiced his understanding that should the
proposed bill not pass, utility bills would decrease
because the RCC would not be applied. Mr. Fink concurred
that individual bills would decrease by approximately $10.
He pointed, however, to federal mandates associated with
utilities and suggested that staff from APUC speak to
potential problems should APUC cease to exist.
Senator Donley next addressed statements by Mr. Fink that
reenactment of the RCC reflects a compromise, noting that
while it might represent a compromise among utilities, it is
not a compromise "among the consumers." He then attested to
constituent complaints over new charges on utility bills.
The situation is worsened by the proposed legislation which
enacts the "first, new tax bill of this year." Further,
restructuring increases the tax for urban residents more
than for those in rural Alaska.
DON SCHROER, Alaska Public Utilities Commission, next spoke
via teleconference from Anchorage. He stressed the
importance of early action on SB 47, and noted the audit
recommendation for a ten-year extension, since the
commission is fulfilling its public purpose. During the
past two years, no one has testified in favor of APUC
sunset. Mr. Schroer acknowledged that SB 47 contains
provisions the commission could "live without." It is,
however, supported in its present form, in the interest of
the impending time crunch.
Mr. Schroer further spoke to investigative delays and
uncertainty in APUC hire as a result of scheduled sunset.
He thanked utilities for their cooperation through early,
lump-sum payment of the RCC prior to expiration of
commission authority to levy the charge. He urged passage
of SB 47 without amendment.
In response to a question from Co-chairman Halford
concerning areas of the bill the commission does not look
favorably upon, Mr. Schroer replied that while the
commission sees no need to change "liberally construed" to
the proposed new language, the change is acceptable.
Discussion followed regarding ability of a utility to opt
out of APUC regulation. BOB LOHR, Executive Director,
Alaska Public Utilities Commission, testified from
Anchorage. He explained that a number of utilities may not
opt out of economic regulation because of size. Proposed
changes in the bill would increase the number of utilities
allowed to do so, but maximum size prohibitions would
remain. Cooperatives may opt out regardless of size, and
municipal utilities are exempt from regulation by law,
unless the municipal utility competes with a privately owned
utility. If one of a number of utilities owned by a
municipality elects to compete with a private utility, all
of the utilities owned by the municipality are automatically
subject to economic regulation by the commission.
Senator Zharoff commented upon the amount of paperwork and
duplication in state and federal filings for small
utilities. Mr. Schroer attested to recent regulations
allowing simplified rate filings for both electric and
telephone utilities.
JIMMY JACKSON, Attorney for GCI, next spoke from Anchorage.
He voiced support for passage of the legislation as quickly
as possible, without amendment. The present state of
"limbo" is undesirable and imposing an adverse affect on the
agency.
DAVE HUTCHENS, Executive Director, Alaska Rural Electric
Cooperative Association, next came before committee, voicing
support for the legislation. He attested to the fact that
the commission should be extended for the same reasons it
was initially created: to prohibit territorial utility
wars, which are both wasteful and destructive, and bring
peace in the electric utility industry. Mr. Hutchens
reiterated previous testimony asking that SB 47 be passed in
its present form, without amendments.
Speaking to language in Sec. 1, Mr. Hutchens advocated the
change from "liberally construed" to "necessary or proper .
. . or reasonably implied." In response to a question from
Co-chairman Halford, Mr. Hutchens voiced his understanding
that new language means that the commission cannot embark on
new kinds of regulation which "liberally construed"
previously allowed. As an example, he cited application by
the community of King Cove and the resulting three-to-two
vote by the commission regarding whether environmental
issues and regulations should be included in deliberations.
The community and AIDEA prevailed, but the vote was close.
With different members on the commission, the vote could
easily have gone the other way. The supreme court supported
the commission exclusion, but the ruling was accompanied by
a long dissenting opinion. That is the type of situation
the new language seeks to prevent. If there is to be an
expansion of commission powers, that decision should be made
by the legislature rather than the commission and the
courts.
Co-chairman Halford asked if the APUC would come under
standard statutory language (reasonably necessary to
implement the statute) if there was no specific language
relating to regulatory standards for the commission. Mr.
Hutchens responded affirmatively and said that was what he
originally proposed. Changes within Sec. 1 reflect
compromise language modeled on wording from the state of
Wisconsin.
Mr. Hutchens next addressed adjustments to the regulatory
cost charge. He voiced concurrence in comments by Senator
Donley and agreed that utilities do not enjoy serving as tax
collectors. However, if the decision is that utilities
should play that role, the burden of collection should be
equitably distributed. An adjustment was the primary
recommendation of legislative audit. The proposal was to
allocate the RCC based on time records evidencing how
commission time is expended on regulation. That approach
was determined to be too time consuming. The present
formula keys the RCC to retail revenues, but revenue dollars
have no real relationship to commission activities. While
electric utility regulation comprises 30% of commission
activity, electric utilities were paying 45% of the cost of
the commission. The proposal contained within SB 47 was
crafted by Senator Sharp as a means of providing equity in
allocation of regulatory costs.
Co-chairman Halford asked if cost charges would increase in
Anchorage while decreasing in other locations. Mr. Hutchens
responded, "Perhaps, very slightly . . . ." Reallocation
could have that effect because of availability of heat from
a regulated natural gas utility. In other areas, providers
of heat are unregulated and thus not taxed to support the
commission.
Senator Zharoff sought clarification of the impact of
increasing the RCC rate. Mr. Lohr explained that the effect
of allowing the cost-of-power exclusion for electric
utilities shifts approximately 45% of the cost of the
commission to all other utilities. Since the commission is
mandated to collect its operating budget from all sources
subject to the RCC, a reduction for one type of utility
requires a commensurate increase for others. RCC rates for
utilities other than electrical will increase by roughly 31%
to offset the 45% reduction to electric utilities. The
commission is only authorized to collect the amount
necessary to cover its budget. Mr. Lohr reiterated that the
RCC has never hit the existing ceiling. The initial rate
equivalent of .45% has dropped since inception. It was .42%
last year. While the trend has been downward, the
commission seeks to maintain latitude within the ceiling,
in light of proposed changes in levies upon electric
utilities.
Discussion followed between APUC staff in Anchorage and
Senator Rieger regarding activity (brush clearing and tree
removal)
in utility right-of-ways.
End: SFC-95, #3, Side 2
Begin: SFC-95, #5, Side 1
Co-chairman Halford called for additional testimony on the
bill. None was forthcoming. He then advised that the
testimony portion of committee review was concluded and
directed that SB 47 be HELD in committee and available for
further consideration during the coming week.
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