Legislature(2021 - 2022)BARNES 124
05/06/2022 09:00 AM House LABOR & COMMERCE
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| Audio | Topic |
|---|---|
| Start | |
| SB190 | |
| HB301 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 301 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 190 | TELECONFERENCED | |
SB 190-REGULATORY COMMISSION AK/REFUSE UTILITIES
9:02:01 AM
CO-CHAIR FIELDS announced that the first 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 reminded members that on 5/4/22 the committee
rescinded action on Amendment 1 to CSSB 190(FIN).
9:02:09 AM
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.
9:02:15 AM
REPRESENTATIVE NELSON objected to Amendment 1.
9:02:23 AM
The committee took a brief at-ease.
9:02:36 AM
CO-CHAIR FIELDS related that a memorandum from Legislative Legal
Services [dated 5/4/22 by Anna Ambrose, Legislative Counsel]
states that no legal problems are seen with Amendment 1. So, he
continued, there is disagreement between the executive and
legislative branches. He said he also spoke to Mr. Robert
Pickett, chairman of the Regulatory Commission of Alaska (RCA).
9:02:52 AM
REPRESENTATIVE NELSON asked whether Co-Chair Fields had talked
with the RCA.
CO-CHAIR FIELDS replied that he spoke with Mr. Pickett and there
is disagreement between Department of Law lawyers about whether
the RCA should be required to do the legwork of looking at a
potential privatization impact on consumers. He invited Mr.
Pickett to address that conversation.
9:03:30 AM
ROBERT "BOB" PICKETT, Chairman, Regulatory Commission of Alaska
(RCA), deferred to Mr. Stuart Goering to address the high-level
points of concern about the lack of definitions, particularly
for privatization.
9:04:13 AM
STUART GOERING, Senior Assistant Attorney General, Commercial,
Fair Business and Child Support Section, Civil Division
(Anchorage), Department of Law, responded that the information
which he sent to Co-Chair Fields does not address any policy
matters or whether the underlying concept of Amendment 1 is a
good or bad idea. He said his concern, and that of the
Department of Law, is that Amendment 1 as currently written
contains several ambiguities, and ambiguities create issues with
both implementation and enforcement. He offered [for the
department] to work with Co-Chair Fields to identify exactly the
problem the co-chair is trying to resolve.
MR. GOERING continued his response. He said the primary issue
centers around the meaning of "privatize". He stated that if
privatization means that the municipality is selling its
certificate of refuse utility to a private entity, then existing
law already requires that that transaction be approved in
advance by the RCA as a certificate transfer, and therefore it's
not clear whether this would add a great deal to that existing
process. If privatize refers to a municipality choosing to use
contractors to perform some of its utility function, he said,
then that's an internal management matter and currently no
municipal refuse utilities are economically regulated so they
are exempt from any RCA oversight over their internal
management. Under current law the RCA has no ability to say
anything about that, he continued, and under the amount of
information that is currently available to the RCA that would be
something completely new. So, Mr. Goering advised, it needs to
be clear what privatize means because if it means selling the
utility outright, then that requires a certificate transfer; if
it does not, then it would mean it is a change in the RCA's
oversight of an exempt utility's management function. He
requested Co-Chair Fields to describe what is meant by
privatized in this context.
9:07:04 AM
CO-CHAIR FIELDS stated that it would cover either. He said that
in the first case where RCA already has some authority, it would
outline exactly the review of the financials to make sure
consumers are protected. In the latter case of a contracted-out
arrangement, he said it would be doing that same review for
consumers. He reiterated that Legislative Legal Services did
not see legal issues with the amendment, and he therefore
surmises it is a disagreement among lawyers.
MR. GOERING responded that the only specific comment [in the
Legislative Legal Services memorandum] was related to the
constitutionality of the amendment. He said he doesn't disagree
that on the whole there are no constitutional issues, but one
potential constitutional issue is with the amendment's provision
relating to higher rates. In the outright sale of a utility, he
explained, the purchasing private entity that is receiving the
certificate is constitutionally entitled to receive statutory
rates and those rates may be higher than the rates that the
municipality was charging. Although the transfer of a municipal
refuse utility hasn't been seen, he continued, there have
historically been several transfers of municipal utilities of
other types. One was the recent sale of municipal light and
power to Chugach Electric Association (CEA) by the Municipality
of Anchorage, another was the sale of the water and sewer
utilities in Fairbanks to a private entity that has operated
them for about 20 years now. Pretty much across the board, Mr.
Goering stated, the rates do go up when the private entity gets
ownership because the rates that were being charged by the
municipality were either obsolete or deliberately subsidized to
keep rates low. So, he said, the private entity must raise
rates to be able to get a compensatory rate and be able to
operate the utility on financially sound footing. The
constitutional issue comes in, he asserted, with the requirement
that the privatization proposal cannot result in higher rates
than if the municipality had continued to operate. Legislative
Legal Services did not address this, he posited, perhaps because
the agency was not aware of the consequences of that, given the
short amount of time the agency had. That's where the actual
constitutional issue lies, he added, not in the overall concept.
Mr. Goering stated that several things could be done to remove
the ambiguities in the amendment so that if it the amendment
eventually becomes law it will be clearly implemented and
clearly enforceable and doesn't run afoul of the aforementioned
constitutional issue.
9:10:40 AM
CO-CHAIR FIELDS stated he is hesitant to hold up the bill any
longer and doesn't think the amendment is unclear but requested
Mr. Goering's specific recommendations for changing Amendment 1.
MR. GOERING responded that AS 42.05 has no definition of
privatized, so the first place to start is to define that term
so it's clear that it does cover both the situations discussed.
Second, he said, "subject to the provisions of this chapter"
[page 1, line 8, Amendment 1] is ambiguous because all the
municipal refuse utilities currently are exempt from regulation,
so they are subject only to very, very narrow provisions of the
chapter; this would apply to those utilities so it would be
better to make that clearer. There are a couple different
formulations, he continued, statutes that apply by their terms
in AS 42.05 notwithstanding an exemption from AS 42.05 either in
whole or in part, but he recommends that some of that language
at least be considered for inclusion so that it's clear that
this does apply to an exempt municipal refuse utility. Third,
Mr. Goering advised, would be to clarify that the goal of
avoiding higher rates is not intended to override normal rate
making principles which provide that a certificated private
business can have approved rates that compensate the business
for its capital investment.
CO-CHAIR FIELDS, regarding Mr. Goering's third recommendation,
maintained that the RCA is capable of looking at a municipal
cost structure versus a private cost structure for proposed
rates and determining which one is higher. The RCA can back out
the subsidies, he said, and do an apples-to-apples comparison.
9:13:01 AM
REPRESENTATIVE NELSON asked whether it is realistic that the RCA
would have the power to utilize Amendment 1 if it were to pass.
MR. GOERING answered that from his perspective, if ambiguities
were removed it would make it more possible for the RCA to do.
He noted that exempt utilities do not pay regulatory cost
charges, a mechanism that funds the RCA, and as a result the RCA
would be essentially without the resources to do the work as far
as an exempt utility is concerned. An appropriation of funds
specifically for that purpose might be required, he said, but
that would be a fiscal matter better directed to Mr. Pickett.
MR. PICKETT responded that it would depend on the nature and
size of the municipal utility being talked about. For larger
ones it would be possible to tease out the imputed subsidies, he
stated, for some of the smaller ones with the lack of accounting
systems and other things it could be nearly impossible. So, he
continued, it would span the gamut depending on who is making
application for this privatization.
9:14:57 AM
REPRESENTATIVE KAUFMAN, given the testimony against Amendment 1,
asked whether the intent of the amendment is to make it
exceedingly difficult or impossible to privatize.
CO-CHAIR FIELDS replied that the intent is to run a model on
which is likely to have a better cost impact on consumers and
make it available to local government officials and consumers as
they decide whether to move forward. He concurred with Mr.
Pickett that sometimes there will be perfectly clear information
and sometimes ambiguity. But, he said, it's better to have some
information than no information when making such a decision.
The modeling would not take all that long, he asserted, and the
RCA does complex modeling all the time.
REPRESENTATIVE KAUFMAN posited that if there were ambiguity it
would mean that [the RCA] would not be able to proceed.
CO-CHAIR FIELDS answered that [the RCA] could advise consumers
and local policymakers based on the information that is had as
to an estimate of what the rates would be under either of the
two options of governance. He said it is normal in modeling to
acknowledge what degree of uncertainty exists based on the
underlying data.
REPRESENTATIVE KAUFMAN asked whether the intent is that they
could still proceed if there is ambiguity.
CO-CHAIR FIELDS replied yes, absolutely, the local policymakers
will have a little more information and can make a judgement
based on the information presented by the RCA.
9:17:12 AM
REPRESENTATIVE MCCARTY offered his understanding that there is
already in statute some things in this amendment, yet some
ambiguity of the amendment and the delay to get that ambiguity
cleaned up may mean there is not time to get the bill through
the session. He suggested that pieces of the ambiguity could be
worked through next session and maybe the bill should be moved
this session to resolve those issues of the intent of the bill.
CO-CHAIR FIELDS responded that Mr. Goering said the RCA does
have some review under a sale but does not have review under
contracting out the services. In either the case, he continued,
the additional clarity around the modeling of cost impacts on
consumers has some value, so he is inclined to do the amendment
and move the bill. He said he is happy to do clarification
later if needed.
9:18:39 AM
REPRESENTATIVE NELSON requested the prime sponsor's opinion on
Amendment 1.
9:18:53 AM
SENATOR ROBERT MYERS, Alaska State Legislature, prime sponsor of
the bill, answered that the more discussion he has had with the
RCA, along with the memorandum from the Department of Law, the
more concerned he is about Amendment 1. The ambiguity portions
are part of it, he said, the Department of Law has pointed out
that as written one portion of the amendment may be effectively
unenforceable. There are some significant problems here, he
submitted, this is a significant policy change. This is about
potentially effectively having the RCA start to regulate
municipal utilities in some ways, he said, which the RCA doesn't
do currently. There is the issue of figuring out what defines
creating a higher rate, he continued. For example, regarding
subsidy, if a consumer's utility rate goes up but their property
tax rate goes down, overall does that result in a lower charge
to the consumer? Senator Myers stated that this is enough of a
significant policy change that he prefers to see it in a
separate bill to be debated on its own merits rather than
attaching it to what started out as a simple board extension.
9:20:31 AM
CO-CHAIR FIELDS asked Co-Chair Spohnholz whether she prefers to
clarify the amendment and take it up again next week, which he
would be happy to do.
CO-CHAIR SPOHNHOLZ replied that she would like to go slow to
ensure it is being done right. She offered her appreciation for
the intent of consumer protection and said it is important to
think about the impact to individual ratepayers when considering
privatization of utilities. Sometimes promises about lower
rates and increased services from privatization don't pan out,
she continued, and the RCA is expert in this kind of work. She
said she would feel comfortable advancing Amendment 1 as an
important part of consumer protections if there is clarification
of the ambiguities.
9:21:44 AM
CO-CHAIR FIELDS emphasized that there is no intent to have the
RCA regulate municipal refuse utilities in the way the RCA
regulates electric generating cooperatives and companies. He
said it is simply to have a consumer protection review at a time
of proposed governance change that would result in privatization
of either ownership or contracted services. It is a new policy,
he allowed, but it is limited in scope. He stated that the
committee would work on the definition of privatization and
bring the amendment back next week. He apologized to the bill
sponsor for the delay.
9:22:26 AM
CO-CHAIR FIELDS announced that CSSB 190(FIN) was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 301 Amendment #7 W.7 - Fields 5.5.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |
| HB 301 Amendment #5 W.5 - Fields 5.5.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |
| HB 301 Amendment #4 W.4 - Fields 5.5.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |
| HB 301 Amendment #3 W.3 - Fields 5.5.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |
| HB 301 Amendment #2 W.2 - Schrage 5.3.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |
| HB 301 Amendment #1 W.1 - Schrage 5.3.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |
| HB 301 Letter of Support 5.2.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |
| SB 190 Amendment #1 - Fields 4.29.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
SB 190 |
| SB 190 Amendment # 1 Legal Opinion - Legislative Legal 5.5.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
SB 190 |
| HB 301 Fiscal Note RCA-RCA 5.6.22.pdf |
HL&C 5/6/2022 9:00:00 AM |
HB 301 |