Legislature(2007 - 2008)CAPITOL 120
05/09/2007 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB232 | |
| HB172 | |
| HJR17 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| HJR 17 | |||
| + | HB 172 | TELECONFERENCED | |
| + | HB 232 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 172 - PUBLIC UTILITY EXEMPTION: REFUSE 1:53:29 PM CHAIR RAMRAS announced that the next order of business would be HOUSE BILL NO. 172, "An Act exempting certain commercial refuse services from regulation under the Public Utilities Regulatory Act and providing for termination of that exemption." The committee took an at-ease from 1:54 p.m. to 1:57 p.m. 1:57:16 PM ELEANOR WOLFE, Staff to Representative Kurt Olson, Alaska State Legislature, said, on behalf of Representative Olson, chair of the House Labor and Commerce Standing Committee, sponsor, that HB 172 was introduced with the idea that competition will remove the regulatory fees and reduce other fees, should [the commercial refuse industry] be deregulated. REPRESENTATIVE GRUENBERG reflected that when deregulation occurs or governmental costs are reduced, there is not necessarily a price reduction. He asked if there is anything the committee can do to ensure a price reduction. MS. WOLFE responded that probably there was not. 2:00:04 PM LARRY KELLY, General Manager, University Refuse, LLC, said rate deregulation of the commercial portion of the refuse industry is essential to the health and well being of the industry's customer base. He explained that competitive pricing is the essential motivation for a company to maintain a dynamic customer-oriented marketing plan while customer service is the key to success. He offered his belief that HB 172 will decrease the response time between a customer's request for innovative service and its implementation. He said he believes that HB 172 will positively alter the face of the market, level the playing field, and promote a proactive partnership with the customers, rather than the "Hey, I'm just your garbage man" approach. He said he feels deregulation is positive, even if the Regulatory Commission of Alaska (RCA) chooses to continue to charge the regulatory fee, as all the companies would then be required to pay that fee. He suggested that the bill would eliminate the possible manipulation of revenue reporting to avoid regulation, which is possible under current statutes. The RCA would be able to focus on the more important issues of certification, quality control, and research and enforcement of customer complaints. He surmises that the bill would mandate the refuse industry to further its customer skills. He repeated that he supports the deregulation of commercial refuse. REPRESENTATIVE GRUENBERG asked whether, if the commercial regulation is eliminated, that would remove a line item cost in the billing. MR. KELLY responded that this is not necessarily the case, as he has not been informed that he may remove that RCA charge from a rate, even though the rate may be deregulated. He said he understands that even with the resulting regulation [after the passage of proposed HB 172] the RCA charge could still exist. REPRESENTATIVE GRUENBERG asked if this meant there would not be a cost savings to the consumer. MR. KELLY conveyed that there would be a cost savings if the pricing is competitive and if the market mandates a competitive, flexible approach in order to maintain the customer base. He offered that upon his review of HB 172, it was not explicit that the deregulation concept removed the charge. He said he understood this bill would remove or deregulate the $300,000 threshold so that all the refuse companies would have to pay the regulatory commission fee. He said he still believes in flexible pricing. REPRESENTATIVE GRUENBERG asked what the bill does if it doesn't remove the charge. 2:05:11 PM RICHARD GAZAWAY, Administrative Law Judge, Common Carrier Section, Regulatory Commission of Alaska (RCA), Department of Commerce, Community, & Economic Development (DCCED), said a funding mechanism for the RCA is the right to recover regulatory cost charges (RCCs). He explained that the RCC is a percentage amount imposed on regulated utilities, allowing the RCA to recover the actual cost of service not collected from exempt utilities. The RCC percentage allocation is capped under AS 42.05.254(f), which also states that the RCA shall allow a public utility to recover all payments made to the commission under this statute. He offered his understanding that under proposed HB 172, the commercial refuse companies would not allocate an RCC charge because it would not be a cost imposed by the RCA. REPRESENTATIVE GRUENBERG expressed his confusion. He said there appear to be several charges. He asked Mr. Gazaway to clarify Section 1 of HB 172, which in part reads "exempt from the provisions of this chapter." He asked whether the utilities would continue to charge consumers the regulatory fee. MR. GAZAWAY responded that the utilities would be exempt from certain provisions of the chapter. However, the RCC fee is within sections AS 42.05.221-281 and these sections are not exempt. He explained that the RCC fee is a monthly allocation per industry, passed on to the consumer from the utility, and this pass-through charge would no longer be imposed because the utilities would not be paying that flat RCC amount. REPRESENTATIVE GRUENBERG asked if there will be a reduction, or an elimination of one of the charges. MR. GAZAWAY replied that it is correct that the commercial refuse customers would not be paying the pass-through RCC charge which they are currently paying, pursuant to AS 42.05.254. REPRESENTATIVE GRUENBERG asked Mr. Kelly if the University Refuse bill to the customer would reflect elimination of that RCC charge. MR. KELLY said yes, if that was the regulation. 2:08:12 PM REPRESENTATIVE GRUENBERG mentioned that part of his district is served by the [Anchorage Municipal Solid Waste Services], and part is served by Waste Management, a private company. He explained that there are landlords in his district who rent dumpsters which are too small, and when the garbage overflows, this creates a significant problem. He asked whether the RCA or the city zoning department enforces this transgression. MR. KELLY responded that he did not know. CHAIR RAMRAS, addressing a question to Mr. Kelly, said he has seen a large turnover of commercial refuse companies during the last three to five years. He asked what the result will be for both the consumer and the commercial refuse companies within the larger municipalities should HB 172 pass. MR. KELLY replied that under proposed HB 172, when a competitor enters the marketplace with new and innovative costs of service, the currently-operating company will be better able to respond competitively. Currently, the operating company needs to file with the regulatory agencies. This is a long, arduous review process. During the review time, the currently-operating company cannot respond competitively. With the passage of HB 172, the currently-operating company could respond much more quickly. CHAIR RAMRAS surmised that HB 172 would be good for companies, allowing them to move quickly, and good for consumers, bringing competition into the market. MR. KELLY concurred. REPRESENTATIVE GRUENBERG mentioned that he has witnessed, in both the trucking and broadcasting industries, challenges to new permits in an attempt to drive the new applicants out of business. He asked whether this was the practice prior to the establishment of the RCA. 2:15:44 PM JAMES KEEN, Chief/Engineering, Regulatory Commission of Alaska (RCA), Department of Commerce, Community, & Economic Development (DCCED), offered that there has been a lot of recent consolidation by commercial refuse utilities. He explained that HB 172 will not change the barrier to entry for new competitors, but will instead allow larger commercial refuse competitors to be more agile. He reported that there have been recent proceedings wherein competitors have applied and the larger existing companies have filed comments in opposition, but the RCA has still allowed more competition. Generally, though, competition has declined in all the major utility markets in Alaska. CHAIR RAMRAS asked if this were a result of capital costs. MR. KEEN replied that this is generally a result of buyouts. CHAIR RAMRAS commented this is a condition of the marketplace. He said he assumed that it was the cost of capital that kept the small competitor out of the marketplace. REPRESENTATIVE GRUENBERG offered his understanding that Mr. Gazaway is saying that an effect of HB 172 will be to make the larger companies more "agile," yet that agility might make it more difficult for the smaller companies to compete. MR. GAZAWAY responded that the current process is meant for regulated commercial refuse providers that earn over a specific revenue threshold, and there is a lag period of 30-45 days for approval of a newly proposed rate. He offered his belief that under HB 172, there would not be a rate approval process, so rate changes could be immediate. He also disclosed that currently there are five open proceedings whereby affiliates of Alaska Pacific Environmental Services of Anchorage, LLC, doing business as Alaska Waste, have petitioned for exemption under AS 42.05.711(d), which allows them to request an exemption from some or all portions of AS 42.05. 2:19:31 PM BOB COX, General Manager, Alaska Waste, explained that his company is an Alaska-owned refuse company providing services throughout Alaska. He stated that Alaska Waste supports HB 172, as the bill deregulates the provision of commercial refuse services. He noted Alaska Waste began as a two-truck operation, competing against several companies including Waste Management, the largest publicly held refuse management company in the U.S., during a rate deregulated environment for commercial refuse which allowed Alaska Waste to implement strategies to compete effectively against Waste Management. MR. COX relayed that the RCA chose to implement full rate regulation when Alaska Waste acquired the Waste Management assets. Alaska Waste believes that the rate deregulation environment provides the best options for both the industry and the consumers because it allows for pricing flexibility, innovative solutions, and expansion of the commercial service offerings, thereby creating incentives for different diversion techniques in recycling. He said he believes rate deregulation provides for ease of entry into the market, reduces regulatory requirements as a company grows, and allows for customer determination of service requirements based on different service options provided by competitors in a market place. MR. COX surmised that HB 172 will eliminate the significant burden on the RCA to police various competitors' compliance, remove commercial refuse from cost-based, rate-making proceedings, eliminate RCA staff time for these proceedings, retain RCA oversight of the commercial refuse industry through continued certification requirements, and retain the RCA investigatory and enforcement options based on customer complaint or petition. He concluded that Alaska Waste believes HB 172 represents good public policy because it will promote competition, eliminate unnecessary regulation, and allow for oversight of the industry to ensure effective and fair competition. 2:21:49 PM CHAIR RAMRAS asked how a new company would enter the market and get consumer business. MR. COX responded that the refuse industry is different than many other regulated utilities. He revealed that although a company could be started with one truck and a few containers, it is the RCA certification process which is cumbersome and time consuming. He offered his belief that the previous rate deregulated model of the RCA allowed a reduced standard for attaining certification since a company only needed to show they had equipment and insurance to operate. He noted that although buying a truck is not a minimal expense, it is one that pays back fairly quickly. He explained that competing in the garbage business is about providing the best quality of service which entails offering the service package that the customer requires or chooses. He said he believes one of the difficulties with a rate regulated environment is the inability to provide many of the options such as bundling of regulated and non-regulated services. The service level offering is different under a rate regulated environment versus a non-regulated one because under a regulated environment the companies cannot offer as many choices. He said Alaska Waste supports HB 172. CHAIR RAMRAS asked how the passage of HB 172 would impact Alaska Waste entering a new market. MR. COX responded that passage of the bill would not accelerate entry, as that is a function of the certification and transfer process. It would, however, create more opportunity within the state. 2:25:35 PM REPRESENTATIVE GRUENBERG asked who is responsible for the decision to allocate dumpsters that are too small to service some locations. MR. COX responded that his company tries to ensure that clients have the correct level of service, but the difficulty is that clients may have to pay more for the service, and clients are attempting to minimize costs. He said Alaska Waste does work with its clients, supplying larger dumpsters, or changing the frequency of pickups, while trying to minimize the extra-cost impact. He offered that Alaska Waste also tries to charge for any extras, giving clients an incentive to change the level of service. He explained that the Municipality of Anchorage (MOA) is responsible for the enforcement of the code and, although the MOA is busy, it has been cooperative with Alaska Waste when citing problem clients. He granted that although Alaska Waste does not have any enforcement ability, it does try to create an economic incentive for its clients. REPRESENTATIVE DAHLSTROM suggested Representative Gruenberg call his assembly person to address the enforcement issue. CHAIR RAMRAS, after asking if there was any more testimony, closed public testimony on HB 172. 2:28:21 PM REPRESENTATIVE DAHLSTROM moved to report HB 172 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 172 was moved out of committee.
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