Legislature(2005 - 2006)CAPITOL 17

01/26/2005 03:15 PM House LABOR & COMMERCE

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03:25:18 PM Start
03:33:59 PM [the Recording Begins Here]
04:07:31 PM HB81
04:33:36 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved Out of Committee
Scheduled But Not Heard
Bills Previously Heard/Scheduled
Moved CSHB 81(L&C) Out of Committee
HB  46-WATER/SEWER/WASTE GRANTS TO UTILITIES                                                                                
CHAIR ANDERSON announced  that the first order  of business would                                                               
be  HOUSE BILL  NO.  46,  "An Act  permitting  grants to  certain                                                               
regulated   public  utilities   for  water   quality  enhancement                                                               
projects and water supply and wastewater systems."                                                                              
TOM WRIGHT,  staff for Representative  John Harris,  Alaska State                                                               
Legislature,  sponsor,  announced,  on behalf  of  Representative                                                               
Harris, that  this is a relatively  new bill which is  limited to                                                               
privately owned companies that are  economically regulated by the                                                               
Regulatory Commission of Alaska (RCA).                                                                                          
CHAIR  ANDERSON said  that Bonnie  Williamson  also supports  the                                                               
LORI  BACKES, Special  Assistant  to the  Mayor, Fairbanks,  said                                                               
that  she  was here  today  to  support HB  46.    She said  that                                                               
privately  held utilities  do not  have access  to certain  funds                                                               
that  public utilities  have.    This bill  levels  the field  by                                                               
making all funds available to all utility companies.                                                                            
^[THE RECORDING BEGINS HERE]                                                                                                    
BENJAMIN BROWN, Legislative Liaison,  Office of the Commissioner,                                                               
Department of  Environmental Conservation, described  the program                                                               
as one primarily  funded through state monies but  there are some                                                               
smaller  communities  that  are  funded by  federal  funds.  Only                                                               
municipalities are  currently eligible  right now. Over  the last                                                               
10 years, 36 local governments  have benefited from these grants.                                                               
There is  a local match  requirement that is scaled  depending on                                                               
the  population   of  the  community  because   the  smaller  the                                                               
community, the less it has to contribute.                                                                                       
3:33:59 PM                                                                                                                    
MR. BROWN explained that the  grants are awarded on a competitive                                                               
basis,  taking  into  account  public  health  and  environmental                                                               
impact of  the project, as well  as community capacity and  a few                                                               
other factors. It's a typical grant program.                                                                                    
MR. BROWN emphasized that are  seven staff positions who run this                                                               
grant  program and  the  same staff  administer  the winter  loan                                                               
programs. This  bill is  a policy  decision that  the legislature                                                               
needs to make. Both the  prior speakers demonstrated the fairness                                                               
of  allowing  communities  who   don't  have  don't  have  public                                                               
utilities to benefit the way communities like Anchorage do.                                                                     
MR. BROWN commented that the only  concern he had was that if the                                                               
bill is  passed as  written, a  third position  would have  to be                                                               
added.  If  everyone who  is  eligible  for  the grant  took  the                                                               
necessary steps to  be considered and subsequently  apply for the                                                               
grant it would  be too much work for the  current staff. However,                                                               
the  existing  staff  could  be  sufficient  if  the  eligibility                                                               
requirements were modified to reduce the workload.                                                                              
3:36:08 PM                                                                                                                    
REPRESENTATIVE  ROKEBERG asked  if  Mr. Brown  could specify  the                                                               
amounts of the grants.                                                                                                          
MR. BROWN answered absolutely.                                                                                                  
REPRESENTATIVE ROKEBERG  asked if this information  could go back                                                               
three years.                                                                                                                    
MR.  BROWN affirmed  that  he would  be happy  to  make sure  the                                                               
fiscal  notes  of  the  last  three years  are  provided  to  the                                                               
committee members.                                                                                                              
3:37:45 PM                                                                                                                    
REPRESENTATIVE  GUTTENBERG   recalled  that  a  few   years  ago,                                                               
legislation  that allowed  privately  owned  utilities to  obtain                                                               
loans was  passed. If the  list of these companies  was available                                                               
one could ascertain who was applying for grants as well.                                                                        
MR BROWN affirmed  that he would make this list  part of the same                                                               
work request.                                                                                                                   
REPRESENTATIVE ROKEBERG  asked if  it is  correct that  there are                                                               
193 utilities  that qualify.  He then  asked if  there is  a list                                                               
that could be provided.                                                                                                         
MR.  BROWN said  Mr.  Stranberg  from RCA  provided  the list  of                                                               
unregulated and regulated utilities.                                                                                            
REPRESENTATIVE  ROKEBERG indicated  that  Mr.  Brown mentioned  a                                                               
modification of the  bill that might affect the  fiscal note, and                                                               
then went on the ask if he had any suggestions.                                                                                 
MR. BROWN  explained that  as long as  there aren't  an excessive                                                               
amount of  people applying for  the grants, then the  fiscal note                                                               
will go down to zero.                                                                                                           
REPRESENTATIVE  ROKEBERG stated  that  the way  the finances  are                                                               
going, it probably will go to zero.                                                                                             
REPRESENTATIVE GUTTENBERG observed that  in the same fiscal note,                                                               
DEC expects to be administering six grants a year.                                                                              
MR. BROWN  stated that there  is a numerical  typographical error                                                               
in  the fiscal  note, and  therefore  a corrected  version as  it                                                               
comes out of this committee.                                                                                                    
REPRESENTATIVE LEDOUX, looking  at page 2 of  the bill, indicated                                                               
that  she wanted  to  clarify that  the  private utilities  being                                                               
economically regulated  by RCA numbered  at around 15 or  20. She                                                               
continued by  asking why, according  to Mr. Brown, there  was 126                                                               
that would qualify for the grants.                                                                                              
3:40:50 PM                                                                                                                    
MR. BROWN  answered by  stating that  there were  two categories-                                                               
certificated  and   uncertificated.    An  entity   that  is  not                                                               
certificated could  become certificated  and not  be economically                                                               
regulated,  but it  could also  request that  it be  economically                                                               
regulated and  not be certified,  thereby making it  eligible for                                                               
this grant  program. There  are some hoops  to jump  through, but                                                               
there is  nothing wrong with  that. At the  end of the  day these                                                               
entities have  to agree  that they  want to  be regulated  by the                                                               
RCA.   The  incentive for  doing  this is  eligibility for  these                                                               
grant funds.                                                                                                                    
CHAIR ANDERSON  clarified that this  total of 126  represents the                                                               
most that can possibly be eligible.                                                                                             
REPRESENTATIVE LEDOUX pointed out  that there are private utility                                                               
companies out there that are  not currently regulated by the RCA,                                                               
and  theoretically, she  asked, if  they wanted  to be  eligible,                                                               
could they ask to be regulated by the RCA.                                                                                      
MR.   BROWN  clarified   that  such   entities  are   home  owner                                                               
associations and  trailer parks  and are not  in the  business of                                                               
selling  utilities  service  to  anyone  who  wants  to  buy  it.                                                               
Although these  entities have  a set level  of demands,  they can                                                               
request to be regulated.                                                                                                        
JIM STRANDBERG, Commissioner, Regulatory  Commission of Alaska in                                                               
Anchorage,  said he  would discuss  very briefly,  the number  of                                                               
certificated and  economically regulated  utilities in  the state                                                               
because  this  might  help  provide   an  understanding  of  this                                                               
particular situation.                                                                                                           
REPRESENTATIVE  ROKEBERG   highlighted  that   private  utilities                                                               
currently  certified are  on  a  list that  is  in  the file.  He                                                               
mentioned  that   the  Trillium  Corporation  of   Wasilla  is  a                                                               
certified  sewer and  water utility  and is  associated with  the                                                               
Settlers Bay Development  of which his company is  a customer and                                                               
not  an owner  of the  Trillium  Corporation. He  ends by  firmly                                                               
stating that there is not a conflict of interest.                                                                               
MR.  STRANDBERG, explained  that the  statute specifies  that the                                                               
RCA is  responsible for certificating, providing  the certificate                                                               
for  public convenience  for all  public  utilities. The  process                                                               
typically involves reviewing a utility as it evolves.                                                                           
3:45:27 PM                                                                                                                    
MR.  STRANDBERG  continued  by   stating  that  the  universe  of                                                               
utilities  is relatively  large.  The other  tasks  that the  RCA                                                               
performs  is for  a  subset  of that  large  group. These  groups                                                               
submit  cost information  to the  RCA which  sets a  rate it  can                                                               
charge for its services.                                                                                                        
MR. STRANDBERG noted  that this bill specifies  that any economic                                                               
activity  that is  regulated  by  the RCA,  is  eligible for  the                                                               
MR. STRANDBERG  stated that  although the  RCA certifies  a large                                                               
number of utilities, currently,  it only economically regulates a                                                               
few utilities  in the state.  This occurs when the  RCA perceives                                                               
that the utility has become a monopoly.                                                                                         
3:47:34 PM                                                                                                                    
MR.  STRANDBERG  said  that  there   were  a  number  of  numbers                                                               
mentioned.  In  the fiscal  note,  there  were 193  non-municipal                                                               
utilities that could be eligible  for these grants. The question,                                                               
he  said, is  how many  of them  would actually  come in  for the                                                               
grants. He  then went on  to say that the  RCA has a  zero fiscal                                                               
note  on this  bill mainly  due to  the fact  that many  of these                                                               
utilities would come under economic regulation at a later date.                                                                 
REPRESENTATIVE  GUTTENBERG mentioned  page 2  on the  fiscal note                                                               
provided  by  RCA  where the  witness  spoke  referenced  reduced                                                               
regulation programs, and  asked for an expansion  of the programs                                                               
description. When  this is implemented,  some utility  groups may                                                               
want to be regulated at a  higher level, he surmised. He ended by                                                               
asking Mr.  Strandberg if he  could talk about this  and describe                                                               
what is being done with the reduced regulation program.                                                                         
MR. STRANDBERG answered  that the RCA has been  working for years                                                               
on this part  of the RCA's operation, which began,  he said, with                                                               
an audit action  item in 2000 that required us  to be more active                                                               
in utilities.  Since that  time, the RCA has provided alternative                                                               
certification programs  for small utilities. The  RCA is bringing                                                               
more utilities under this provisional certification program.                                                                    
MR.  STRANDBERG  stated  that  additionally,  he  said  that  RCA                                                               
currently   has  an   open  regulation   docket  and   an  active                                                               
stakeholder   working  group   to   change  the   way  that   RCA                                                               
economically  regulate  to  make  it  more  affordable  and  more                                                               
REPRESENTATIVE  GUTTENBERG asked  what  the  regulation break  up                                                               
point is.                                                                                                                       
MR. STRANDBERG  stated that  is to  be determined.  Currently RCA                                                               
have assembled stake holders and are awaiting their analysis.                                                                   
REPRESENTATIVE   ROKEBERG,  referring   back  to   Representative                                                               
Guttenberg's  statement,   stated  that  when  this   process  is                                                               
completed,  there is  a different  method  of regulating  smaller                                                               
utilities which are  less of a burden. He ends  by asking if this                                                               
is the objective.                                                                                                               
MR. STRANDBERG  replied yes  and announced that  the goal  of his                                                               
agency was  to lessen  the cost  of regulation  and make  it more                                                               
effective. He then stated that whatever  the rule is that the RCA                                                               
develops will represent full economic  regulation but a different                                                               
set of rules will be configured for smaller utilities.                                                                          
REPRESENTATIVE ROKEBERG asked  if this included all  the class A,                                                               
B, and C water utilities.                                                                                                       
MR.  STRANDBERG announced  that his  group spent  lot of  time on                                                               
this indulgence and all known small utilities were included.                                                                    
REPRESENTATIVE ROKEBERG took this  further by asking whether they                                                               
regulate both the A and B classes.                                                                                              
MR.  STRANDBERG  stated that  this  includes  any utilities  that                                                               
provides service to 10 or more customers.                                                                                       
REPRESENTATIVE ROKEBERG asked if  there are still three different                                                               
categories of water utilities still.                                                                                            
MR.  STRANDBERG answered  that  the  Department of  Environmental                                                               
Conservation has this  nomenclature and this has more  to do with                                                               
water quality. The  RCA has a different set  of definitions under                                                               
which it operates.                                                                                                              
REPRESENTATIVE ROKEBERG asked if  private utilities are regulated                                                               
if they are monopolies in their area.                                                                                           
MR. STRANDBERG stated this is correct.                                                                                          
3:55:26 PM                                                                                                                    
CHAIR ANDERSON closed public testimony.                                                                                         
REPRESENTATIVE  ROKEBERG  inquired  as  to how  the  RCA  handles                                                               
grants and how this legislation affects rate setting.                                                                           
MR. STRANDBERG  answered that the  RCA has regulatory  tools, and                                                               
therefore  it has  the ability  to  not allow  a privately  owned                                                               
utility  to enrich  its  shareholders from  the  provision of  an                                                               
infrastructure grant like this. The  utility cannot earn a return                                                               
on the grant  and it cannot have the customer  pay back the money                                                               
gained by the grant contribution.                                                                                               
KARA MORIARTY, President, Greater  Fairbanks Chamber of Commerce,                                                               
announced her support  for HB 46 and the idea  that all utilities                                                               
should be  on the  same level playing  field. Currently  the only                                                               
utilities that  are eligible  for these  grants are  public owned                                                               
utilities.  The  grants  are primarily  used  for  infrastructure                                                               
development and upgrades. She noted  that the shareholders cannot                                                               
receive returns  on investments. The ratepayers  and citizens are                                                               
the only ones who can receive benefits from the grants.                                                                         
MS.  MORIARTY  then  went  on   to  say  that  all  utilities  in                                                               
Fairbanks,   Alaska  are   either  privately   owned  or   are  a                                                               
cooperative.  She  continued  by   stating  that  businesses  and                                                               
residents where are  at a disadvantage compared  to other Alaskan                                                               
residents.  The cost  of doing  business, she  said, is  great in                                                               
Fairbanks.  The  problem of  connection  to  major utility  lines                                                               
hampers  economical  development,  even downtown  near  the  city                                                               
center.     She  concluded  by   reiterating  that   private  and                                                               
cooperative utilities should have access to the grants.                                                                         
CHAIR  ANDERSON, upon  determining  that no  one  else wanted  to                                                               
testify, closed public testimony.                                                                                               
4:01:50 PM                                                                                                                    
REPRESENTATIVE ROKEBERG  moved to report  HB 46 out  of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes. There being no objection, it was so ordered.                                                                             

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