Legislature(2021 - 2022)BARNES 124
05/02/2022 03:15 PM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| HB301 | |
| HB382 | |
| SB190 | |
| Workers' Compensation Appeal Commission | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 301 | TELECONFERENCED | |
| + | HB 382 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 190 | TELECONFERENCED | |
SB 190-REGULATORY COMMISSION AK/REFUSE UTILITIES
4:56:32 PM
CO-CHAIR FIELDS announced that the next order of business would
be CS FOR SENATE BILL NO. 190(FIN), "An Act extending the
termination date of the Regulatory Commission of Alaska;
relating to Regulatory Commission of Alaska regulations
regarding refuse utilities; relating to the powers and duties of
the legislative audit division; and providing for an effective
date."
CO-CHAIR FIELDS moved to adopt Amendment 1 to CSSB 190(FIN),
labeled 32-LS1525\W.2, Radford/Ambrose, 4/28/22, which read:
Page 1, line 3, following "division;":
Insert "relating to the privatization of refuse
utilities;"
Page 2, following line 8:
Insert a new bill section to read:
"* Sec. 3. AS 42.05.641 is amended by adding a new
subsection to read:
(b) A municipality that seeks to privatize a
municipal refuse utility that is subject to the
provisions of this chapter shall submit a proposal to
the commission for review. The commission may approve
the proposal if the commission finds that
privatization will not result in higher rates for
consumers and that privatization is in the public
interest. A privatization proposal must include
(1) a business plan that lists the
prospective vendors;
(2) the projected cost of private operation
compared to continued municipal operation for a ten-
year period;
(3) disclosure of any potential conflicts
of interest on the part of municipal officials; and
(4) proposed methods
(A) for periodically evaluating the
utility's performance to avoid diminished service
quality, interruption, or stoppage of work by the
contractor;
(B) to encourage competition and
productivity;
(C) for monitoring a contract in order to
detect any contractor defaults, monitor penalties, and
prepare for contract renewals or renegotiations and
inflation; and
(D) to address municipal employee
displacement."
Renumber the following bill sections accordingly.
CO-CHAIR SPOHNHOLZ objected for purposes of explanation.
CO-CHAIR FIELDS recalled that including refuse utilities in the
Regulatory Commission of Alaska (RCA) was discussed at the
previous bill hearing. He said a consolidated review process
makes a lot of sense, and given the underlying bill looks at
refuse utilities it also makes sense to add some consumer
safeguards; for example, a municipality decides to change
governance of the refuse utility. These proposed changes were
suggested by the Alaska Public Interest Research Group, he
continued, so Amendment 1 does not prohibit or require, nor
encourage or discourage privatization, but it does say that if a
municipality is going to privatizes a refuse utility there needs
to be an RCA review to ensure the proposed privatization will
not raise cost for consumers beyond those which would be
incurred under the existing governance structure.
4:58:24 PM
REPRESENTATIVE KAUFMAN expressed concern that Amendment 1 would
preempt. He said that if the utility has been part of the
municipality it may not represent good allocation of the
operation, maintenance, and other costs. So, he continued,
regarding the clause that it will not result in higher rates for
consumers, the rates that were being charged were maybe not
realistic. Putting a lid on it, he argued, would make it nearly
impossible to determine the market value of the services.
CO-CHAIR FIELDS replied that it is not his intent to arbitrarily
cap rates at a point in time. He said his assumption is that in
doing this analysis the RCA could analyze the actual costs
incurred by a municipality and what the costs would be over a
reasonable time horizon versus what the costs would be under a
proposed privatization. He requested an RCA representative to
address whether the RCA would have the ability to look at what
price escalation would be under an existing municipal structure
versus potential price escalation under a proposed privatized
structure.
4:59:57 PM
ROBERT "BOB" PICKETT, Chair, Regulatory Commission of Alaska
(RCA), responded that the amendment raised some legal questions
concerning the rest of Alaska's statutes when he saw it for the
first time this morning, so he immediately asked Stuart Goering,
Assistant Attorney General, to read the amendment. Mr. Pickett
stated that it would be very difficult for a non-regulated
municipal utility to do that because there is a wide variation
in how municipalities handle their accounting practices. He
further stated that if a municipality is subsidizing the refuse
service, it gets into intergovernmental cost charges, which
different entities handle differently. He clarified that he
isn't saying it's impossible, but that there would be some
challenges in trying to project a regulatory framework onto an
entity that isn't regulated to do this analysis and determine
whether it is ultimately going to be in the benefit of the rate
payers.
CO-CHAIR FIELDS asked what would prevent the RCA from asking a
municipality what the costs are of providing a refuse collection
service and what the municipality anticipates those costs will
be over a 10-year period, as provided in the amendment.
MR. PICKETT answered that when going through rate cases and the
schedules that are required to make those assessments, it gets
into the nature of the municipality and how the municipality
handles its accounting practices. Plus, he added, there are
some legal issues involved with that too.
CO-CHAIR FIELDS invited Mr. Goering to address the legal
concerns.
5:02:09 PM
STUART GOERING, Assistant Attorney General, Commercial, Fair
Business and Child Support Section, Civil Division (Anchorage),
Department of Law, responded that there are several different
issues from a regulatory perspective. He explained that to his
knowledge there are no economically regulated municipal refuse
utilities in Alaska right now. All municipalities that have
certificates, he said, are exempt under either AS 42.05.711(b),
which is the exception for political subdivisions of the state,
or AS 42.05.711(d), which is the Municipality of Anchorage Solid
Waste Services. He stated this means that the RCA does not
specify any of the economic conditions of a municipality's
operations, which includes that the RCA doesn't tell a
municipality how to do accounting, there is no uniform system of
accounts, there is no uniform depreciation schedule, and there
is no cost allocation manual for the other governmental
operations to share costs with the utility. As a result, Mr.
Goering continued, the RCA has no previous knowledge of the
economics of any of the municipal waste collection utilities [in
Alaska]. That is the background, he noted, for Mr. Pickett's
response that it would be extremely difficult because without
that information the RCA would be doing that from scratch.
MR. GOERING stated that even with a regulated utility that has
been keeping its books and records in the proper form for an
economically regulated utility, and with a long history of
economic regulation, rate cases often take multiple years. The
timeline for those is 540 days, he said, and can sometimes go
longer with extensions that the parties ask for because of the
complications with the cases. So, he continued, it isn't a
simple matter to step into the middle of something which has
been operating for potentially since statehood in some cases and
try to figure out the economics of the operation without any
background at all, and that is where some of the difficulty
would come in for the RCA. He said he can address the legal
issues if the committee wishes.
CO-CHAIR FIELDS said he understands that the RCA would be
requesting new information since the bill brings in some new
responsibilities and that is why Amendment 1 was introduced.
5:05:12 PM
REPRESENTATIVE SCHRAGE noted that the bill adds refuse utilities
under the RCA regulations without this amendment passing. He
asked whether there are legal concerns with bringing in refuse
utilities under the RCA and/or hurdles in drafting and creating
regulations related to refuse utilities given the lack of
experience regulating such utilities.
MR. GOERING answered that the bill does not bring refuse in as a
regulated utility for the first time; refuse has been a
regulated utility class for a long time. He said Amendment 1 is
different from the rest of the bill in that it addresses
municipal refuse utilities; the rest of the bill relates to
economically regulated refuse utilities that are privately owned
and must follow the RCA's regulations on uniform system of
accounts and must file periodic rate cases. He explained that
the other part of the bill, which is being referred to, modifies
AS 42.05.381 to change the way that those rates are made, not
assign responsibility for making those rates in the first place.
So, Mr. Goering continued, that part of the bill would simplify
the process rather than making it more complicated, but it would
not remove any of the background information that the RCA
currently gets in the form of annual reports, which municipals
don't file, and periodic rate cases, which municipals don't
file. So, he stated, they really are two separate issues - the
RCA is already regulating refuse utilities, but not municipal
refuse utilities.
5:07:01 PM
REPRESENTATIVE NELSON said he is always hesitant to add policy
to a simple extension of the termination date of a regulatory
commission. He asked whether the bill sponsor has taken a
position on Amendment 1.
SENATOR ROBERT MYERS, Alaska State Legislature, prime sponsor of
CSSB 190(FIN), answered that he received the amendment on
[4/29/22] and is still figuring out what Amendment 1 entails.
He said he isn't sure one way or the other and was planning to
defer to the RCA's expertise.
CO-CHAIR FIELDS offered his appreciation for the perspective of
the RCA and Department of Law, as well as his appreciation for
Senator Myers trying to address refuse utilities. The RCA is
very capable and able to analyze complex information, he said,
and the information from refuse utilities is less complex than
that of electric utilities which the RCA deals with.
CO-CHAIR SPOHNHOLZ removed her objection to Amendment 1. She
said that while it would require work on the part of the RCA to
clearly define and measure cost centers, one of the RCA's jobs
is to ensure there aren't unnecessary rate increases to
Alaskans. The RCA is capable of incredibly complex oversight
and analysis, she added.
5:08:44 PM
REPRESENTATIVE KAUFMAN objected to Amendment 1.
5:08:54 PM
A roll call vote was taken. Representatives Fields, Spohnholz,
and Snyder voted in favor of Amendment 1 to CSSB 190(FIN).
Representatives Kaufman, Schrage, McCarty, and Nelson voted
against it. Therefore, Amendment 1 to CSSB 190(FIN) failed to
be adopted by a vote of 3-4.
[CSSB 190(FIN) was held over.]