Legislature(1999 - 2000)
04/21/1999 08:07 AM House URS
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* first hearing in first committee of referral
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+ teleconferenced
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HB 81 - ELECTRIC CONSUMER'S BILL OF RIGHTS CHAIRMAN HUDSON announced that the first order of business was House Bill No. 81, "An Act relating to the provision of electric service in the state; and providing for an effective date." Number 0153 REPRESENTATIVE NORMAN ROKEBERG, Sponsor, Alaska State Legislature, noted that Janet Seitz, his Legislative Assistant, was present to answer any questions. He stated: House Bill 81 is the result of the testimony and information that was provided to the legislature in the form of the Joint Committee on Electric Utility Restructuring, which is a ... committee which I co-chaired with Senator Sharp this last year. In our studies of the electrical restructuring issue it became apparent to me, Mr. Chairman, that because we are fundamentally a publicly power-owned state the first building block that we should take up in consideration of any electrical restructuring is the consumer protection issues and giving guidance to the APUC [Alaska Public Utilities Commission] as to what the legislature believes to be the most important issues before we, if you will, dive off the cliff into any area of semi-deregulation or restructuring. With that, Mr. Chairman, we have drafted this legislation, which is intended to be triggered, if in fact the APUC and/or the legislature adopts any form of electrical restructuring or retail wheeling, whatever you wish to describe it. Mr. Chairman, I have passed out the committee a letter that was addressed to myself and Representative Sanders, as the chairman of the subcommittee in the Labor and Commerce Committee last year or in 1997, which is an opinion of the Department of Law, indicating that under existing statute the APUC has the ability without legislative direction to take up and grant competition. Mr. Chairman, I would point out that over the course of testimony to the interim committee this was a major ... topic of conversation, but I would report to you that I think there's general consensus throughout the states in utilities that the APUC does retain this power. At one point a couple years ago there was some controversy about whether or not it exists, but I think everybody recognizes now or agrees with this legal opinion that the APUC does have the power and with that, Mr. Chairman, because there is a docket before the APUC by Aurora Power to be an aggregator or resaler of power, I think this bill is appropriate currently, and therefore, it has some sense of urgency and a sense that even if the legislature does not act on the report by CH2M Hill that the docket before the APUC allows them and almost asks them to take up the whole issue of restructuring and particularly that of the resaler or the aggregator. Mr. Chairman it's my opinion that the provisions for these regulations and consumer protections should be in place before that docket is ruled on finally to protect -- in the public interest. This proposal is not unique among the states, Mr. Chairman. You'll find in your packet just some examples of legislation and reports from various other jurisdictions; including Arizona, California, Maine [and] Delaware that have adopted an electric ... consumer bill of rights, so I can't take credit for being the originator of this idea, but it's positive legislative plagiarism, if you will, that we address these particular issues. Among the issues ["rights"] that are covered here, Mr. Chairman, are the Right to Know, the Right to Choose and the Right to Fair Dealing, the Right to Redress, the Right to Privacy, the Right to Service Quality and Required Code of Conduct and Oversight. The bill further mandates regulations to require that electrical service providers must continue to provide service to residential consumers who demonstrate that economic hardship has prevented payment of a bill in full. So, this speaks to the issue of not only the provider of last resort, but also speaks to the issue of inability to pay, and those particular consumer issues. The bill is intentionally simple, in the sense, to give maximum flexibility to the APUC in drafting the regulations, but on the other hand it points out and it stipulates those areas that should be covered by the commission. We also have distributed to you an e-mail that we received, just yesterday, from Karl Rabago of CH2M Hill, who was kind enough to look at the legislation and makes a critique of a legislation and has several points and recommendations to the committee regarding adjustments to the bill. We haven't had time to digest that and put it in any amendment form, Mr. Chairman, but I would commend that to the committee. Also, we do have a letter of opposition from Copper Valley Electrical Association, and it points out something very interesting that everybody should be aware of; that in the existing statutory scheme in Alaska publicly owned utilities may opt out by election. Copper Valley has opted out of regulation by the APUC from economic regulation; however, this bill before you does provide that it can't be opted out from and that's an important fact and I wanted to bring that to the committee's attention, because a consumer bill of rights and protection of the consumer interest is important whether you regulate it or not. So, I think it should have a universal application to all consumers in the state of Alaska. ... There's the concerns and I appreciate Mr. Wilkinson's concern; hopefully he'll be on teleconference this morning and be able to testify. We also have testimony hopefully from Ms. Pease from Aurora Powers speaking on some of the issues that are important. Mr. Chairman, I think there is a certain sense of urgency on this legislation. I think it needs to tuned up a little bit, but I commend this to the committee and look forward to working on this and reporting this bill out. Thank you Mr. Chairman. Number 0680 REPRESENTATIVE BERKOWITZ wondered what legislation, from another state, was used as a pattern for Representative Rokeberg's legislation. REPRESENTATIVE ROKEBERG deferred the question to Ms. Seitz. JANET SEITZ, Legislative Assistant for Representative Rokeberg, Alaska State Legislature, replied that HB 81 was basically patterned after Michigan. REPRESENTATIVE BERKOWITZ indicated that if the adjective "competitive" was eliminated throughout the legislation, the consumer protection would apply to all consumers in the state and it would avoid the problem of having providers claim that they weren't in a competitive market, and therefore, they didn't have to comply. Number 0740 REPRESENTATIVE ROKEBERG pointed out that the intention of the bill is to have the protections in place only for those areas and those jurisdictions that have competition. Under current regulatory authority a lot of the issues should to be spoken to, even though there is a certain universality. The concern is what type of statutory and regulatory regime would a competitor of including a pilot program be operating under. The intent of this legislation is to draw to the commission's attention what the legislature believes the public policy of the state should be in the competitive environment, but not necessarily a fully regulated environment. REPRESENTATIVE BERKOWITZ explained that it would leave consumers in a non-competitive environment with different rights than is seen in a competitive environment. REPRESENTATIVE ROKEBERG said that he believes Representative Berkowitz's statement is probably accurate. The question is whether or not the consumers in a non-competitive environment are properly protected by the existing regulatory scheme. He added that it is not the intention of HB 81 to rewrite the entire regulatory scheme that already exists, but to rewrite it in that area, if selected, to adopt competitive market place conditions for electric service providers. The bill speaks to instances of single billing provisions, which really only apply to competition and those type of circumstances. REPRESENTATIVE BERKOWITZ stated that if that is really the intent of the bill then it seems that something could be done to tighten up the title. Number 0888 REPRESENTATIVE COWDERY said, "You said that the smaller utilities -- this doesn't affect the small ones; the unregulated utilities. Just regulated or unregulated. He asked, "Does it affect both or the smaller utilities it's your attention not to affect?" REPRESENTATIVE ROKEBERG clarified that it is not a matter of size, but whether or not it is a competitive environment. Currently, all utilities in the state that have not opted out are regulated by the APUC. Even the opted out utilities are regulated in terms of their service area. The distinction is the whole issue of restructuring the competitive market place. The point of HB 81 is contingent on the creation of any kind of competitive environment. He noted that one of Mr. Rabago's recommendations is to make sure that the bill is clear that it would affect the buy-out program. REPRESENTATIVE COWDERY wondered if Chugach Electric Association (CEA) and Matanuska Electric Association (MEA) have had an opinion on HB 81. REPRESENTATIVE ROKEBERG indicated that he is not sure if any formal testimony was received on the bill, but they have been in discussions with them for several years. CHAIRMAN HUDSON noted that Robert Wilkinson from Copper Valley Electric Association (CVEA) will be testifying on the bill as well as Steve Conn from the Alaska Public Interest Research Group (AKPIRG). Number 1037 REPRESENTATIVE PORTER referred to Representative Rokeberg's testimony, specifically the part on right to privacy and wondered where privacy was stated in the bill. REPRESENTATIVE ROKEBERG referred to page 2, subsection (4) on line 15 of HB 81, where it reads, "maintain information and records, including records concerning individual electric use patterns, about the electric service provider's consumers as confidential records." There is additionally some comments by Mr. Rabago on the treatment of those records. The intent there is so a competitor doesn't become privy to that, although there are provisions and recommendations that the records be available without the names attached to them so they are a part of a statistical pool. CHAIRMAN HUDSON indicated that he was looking in HB 81 for a reliability requirement. Number 1144 REPRESENTATIVE ROKEBERG referred to page 2, line 31, subsection (d) of HB 81, where it reads, "The commission shall adopt regulations to require a supplier or an aggregator operating in a competitive electric service market to meet minimum standards for certification as a condition of market entry." CHAIRMAN HUDSON asked if the idea is that reliability will fit within the minimum standards. REPRESENTATIVE ROKEBERG replied that is the intention. He pointed out that reliability was probably the number one issue of the testimony given at the interim committee. Number 1190 REPRESENTATIVE DAVIES indicated that there may be some question about defining when a competitive electric service market has been entered into. In the report from CH2M Hill there are a variety of pathways that are discussed; one, jumping in with both feet and two, systematically getting there. The question in his mind is if they might want to consider a more measured approach to getting into retail competition. He wondered at what point are they truly in a competitive retail market and if that might be something the APUC decides. Clearly whenever there is some consumer choice this would have to come into effect. REPRESENTATIVE ROKEBERG referred to paragraph 2 on page 1 of Mr. Rabago's e-mail, where it states, "A competitive electric service market means a market or program in which retail electricity customers are provided a choice of electricity provider, whether on a permanent, limited, or pilot basis." He said that he would be recommending that as an amendment to HB 81 in order to make sure that it's clarified. REPRESENTATIVE DAVIES asked Representative Hudson what his intent is on moving the bill. CHAIRMAN HUDSON replied that the committee will work through testimony and then decide. He agreed with Representative Rokeberg that an amendment should be made to include Mr. Rabago's definition. REPRESENTATIVE ROKEBERG stated that he appreciates Mr. Rabago's input, which is not only complimentary to the legislation, but also makes some extremely important recommendations. Number 1354 CHAIRMAN HUDSON stated, "One of the questions I have, Representative Rokeberg, is we're putting in a new provision in there to essentially tell the commission to establish by regulation all of these consumer protective elements in here. To your knowledge, particularly since you dealt with this throughout the interim last year, how many of these are they currently dealing with? Do they have anything like this already on the books that we're trying to expand or to fulfill, or do they not?" REPRESENTATIVE ROKEBERG replied, "They do have provisions on the economic hardship issue, but in terms of many of the other issues, I'm basically guessing that they don't, because a lot of these are based on the necessity to have regulation in the competitive environment not in a non-competitive environment." He pointed out that a substantial fiscal note may accompany HB 81. There have been some conversations with the APUC. He said that in a certain sense it doesn't surprise him, and in another sense he finds it disappointing, but anytime legislation is being drafted of this scope, meaning that HB 81 is an essential portion of any restructuring regime, there is going to be some cost. It is up to the legislature to decide if they want to absorb any of those costs and how that is going to be done with relation to HB 81. CHAIRMAN HUDSON requested clarification on whether or not there was any fiscal note. REPRESENTATIVE ROKEBERG clarified that they haven't received one yet. STEVE CONN, Alaska Public Interest Research Group (AKPIRG), testified via teleconference from Anchorage. He stated that from day one, as we enter the brave new world of electric restructuring deregulation, Representative Rokeberg has sought to learn and define the consumers interests. He pointed out that HB 81 is seeking to address the brave new world in which consumers will now be confronting competition. In California there were people who held themselves out as capable of providing service and were actively soliciting consumers when they in fact could not provide service; therefore, pre-certification requirements are absolutely essential. A problem that is less apparent in the bill is the "slamming" phenomenon that happens in telecommunications, whereby someone calls and before the consumer knows it they've been switched. The Federal Communications Commission (FCC) has developed regulations for allowing a consumer, who discovers that they are working with a "Brand X" provider, to opt out of that within a certain period of time. This new environment does require funding. Historically, the biggest problem in Alaska has not been the absence of legislation to protect consumers, but the wherewithal to enforce and implement that legislation. He said that he hopes a fiscal not emerges which is satisfactory to the legislature and accompanies the bill throughout. Number 1623 MR. CONN continued. He pointed out that another issue the bill is seeking to address is the issue of "cherry-picking." There are customers who are desirable and there are customers that are less desirable. He expressed concern with the language on page 2, lines 10 through 14, which reads, "offer electric service to any consumer in the area served by the electric service provider so long as providing the service is technically feasible at a reasonable cost to the provider; provide electric service choices and pricing options to all consumers without discrimination." He wondered who is alternately going to determine the technical feasibility and the reasonable cost. He also recommended that the language read, "provide the same electric service choices," instead of, "without discrimination." MR. CONN concluded by stating that HB 81 demands that APUC or some regulatory mechanism have exclusive and broad power to deal with consumer complaints. He believes that HB 81 is a good first step, but he hopes that the committee will take his recommendations under advisement and fine tune the bill. Number 1743 REPRESENTATIVE BERKOWITZ stated that it seems the consumers are best served if the adjective "competitive" is taken out of the bill. If it is going to work for consumers in a competitive environment, it should work for all consumers. MR. CONN responded that it is quite obvious that HB 81 would not have emerged without the competitive reality that is moving across the state. There are a lot of electric cooperatives, particularly the smaller ones, that do a good job of serving their consumers and there is a more immediate relationship between the operators and the consumers. He said that his own sense of what the word "competitive" means is that it reflects a movement throughout the entire state and is not reflective of subregions. He views the bill as one that reflects that the entirety of the state, particularly as it relates to suppliers and aggregators. Number 1813 CHAIRMAN HUDSON referred to Mr. Rabago's suggestion that the legislature implement a definition of a competitive electric service market. That way if the term "competitive" was left in the bill with a definition, it would fit better. REPRESENTATIVE BERKOWITZ pointed out that anytime there is a definition, it is a loophole for somebody. REPRESENTATIVE COWDERY noted that competition is suppose to be the best means of consumer protection. The utilities are deregulated to allow for competition. MR. CONN explained that there is no question that competition is good for the consumer, but the problem that is found with the new realms, telecommunication and electric or other, is that those who speak with one tongue, competition, often seek to discriminate as they actually move into a realm and implement their endeavors. For example, "cherry-picking" is a phenomenon; the new competitor doesn't really want to compete for all the business, they just want to compete for the very best business. A bill like HB 81 serves a useful purpose, because it sustains, maintains and underscores competition. REPRESENTATIVE COWDERY stated that if this regulation is needed when competition occurs, then it must really be needed without competition. Number 1941 ROBERT WILKINSON, Chief Executive Director, Copper Valley Electric Association (CVEA), testified via teleconference from Glennallen. He expressed his appreciation to Representative Rokeberg and the spirit of legislation regarding HB 81. He indicated that he had a few concerns with the bill; one, that the CH2M Hill report is in draft form. In his opinion the state falls short of properly addressing rural issues. Another policy issue that has not been addressed or finalized is how will public power, in general, be treated. As heard from the consultants this is a public power state with somewhere around 90 percent of the costumers being served by public power utilities. With those issues open, he believes that adopting a bill of rights that would effect every regulated electric utility in the state would be premature, given that it is not certain if competition will be coming to certain parts of Alaska. Number 2061 MR. WILKINSON continued. Two, the applicability of Article 3 of AS 42.05, which has a provision where cooperative utilities may opt out from under economic regulation by the APUC. CVEA exercised that right last year and of the 36 percent of CVEA members who were asked, "Should CVEA be exempt from regulation by the APUC?", 67 percent said yes. A major concern during the time when the CVEA was campaigning for deregulation was the fair and non-discriminatory treatment of the customers by the utility. As part of the campaign CVEA adopted their APUC approved Tariff as the rules and regulations they would follow under local regulation. They are planning on making some modest changes to the Tariff to make it a little more user-friendly to the customer. There was a concern identified by the members that if the CVEA took the APUC out then there would not be an appellate body to go to in the event they had a dispute with the utility. The CVEA adopted a very expanded complaint procedure, and created what they call a Board of Adjustment, which is composed of members of the association. The Board of Adjustment serves as an appellate body for going through a dispute resolution. Specifically, if the members are not satisfied with how the utility decides on a certain issue then they appeal to the Board of Adjustment and then the Board of Adjustment may appeal to the full Board of Directors if the customer is still unsatisfied. The CVEA also adopted principles that say that their services and policies will be fair and non-discriminatory. This again was a very important issue to the membership. MR. WILKINSON concluded by saying that he feels it is premature to move HB 81, given where the CH2M Hill study is on rural Alaska and public power. He believes that CVEA's local elected Board of Directors can do the job of providing electrical service much better than the APUC, and that is a major reason they opted out of APUC regulation. Doing business in a rapidly changing environment when there is the bureaucracy of the APUC is very difficult. CVEA has two open dockets at the APUC still dealing with competitive issues. He said that if CVEA is going to survive a new competitive environment, they cannot afford APUC regulation and they feel they can do better on their own. Number 2246 REPRESENTATIVE PORTER asked Mr. Wilkinson what kind of competitive arena he was in presently that would entail a "cherry-picking" case. MR. WILKINSON replied that there was a company called Alaska Power Systems that was attempting to install generators adjacent to two of CVEA's customers and it was a direct competitive threat. If these customers had went off the system it would have been a good example of the stranded investment issue. CVEA would have lost energy sales, and given the cost to operate this utility CVEA would have experienced adverse rate impacts on their customers. The company, Alaska Power Systems, is now out of business and the situation has more or less gone away. There was also a situation where a company contracted with CVEA's largest industrial customer, Petro Star Valdez Refinery, and it looked as if they were going to install their generating equipment and the Petro Star Valdez Refinery was going to leave CVEA. The members, in that situation, would be facing a rate increase of over 13 percent, which means "cherry-picking" in rural Alaska is very real and CVEA has seen it first hand. He pointed out that the "cherry picking" issue would still remain under the purview of the APUC, because "cherry picking" is a service territory issue, which the APUC continues to regulate. He added that if a company came in attemping to take some of CVEA's large customers, they would file a complaint with the APUC. Number 2356 REPRESENTATIVE ROKEBERG said that he appreciates Mr. Wilkinson's comments on HB 81. He requested clarification on whether or not Mr. Wilkinson's concern is more a concern with regards to the APUC's ability or inability to follow through and implement HB 81 or if it is about the area of competition. MR. WILKINSON expressed concern with regards to competition coming to rural Alaska prior to adopting legislation, because it would give the APUC broad power and that is a concern. Also, he believes that the study does not properly address what competition will look like in rural Alaska. Number 2400 REPRESENTATIVE ROKEBERG pointed out that Representative Berkowitz has asked some questions along the lines of why the provisions of HB 81 would not be applicable in a non-competitive environment. He asked Mr. Wilkinson if he would shed some light on whether or not he feels it is applicable to his circumstance currently. MR. WILKINSON stated that HB 81 is very much applicable to every utility that requires a certificate. He pointed out that it might be appropriate to include a definition as to where competitive markets are going to exist, and certainly if HB 81 was modified to say that the competitive markets include the interconnected Railbelt system or the Anchorage area, whatever the committee chooses, HB 81 would make a lot more sense. REPRESENTATIVE ROKEBERG restated his question. He asked if HB 81 was applied to Mr. Wilkinson's service area, currently, not withstanding whether there was competition or not, does he think it would be beneficial or harmful. TAPE 99-17, SIDE B Number 2461 MR. WILKINSON stated, "... our Board of Directors, which are elected by our 3,300 customers are the best equipped to determine what is best for this region of the state, not the Alaska Public Utilities Commission." CHAIRMAN HUDSON explained that the committee is looking for what the constructive elements in HB 81 are and where they should apply and where they should not apply. MR. WILKINSON responded that he would be happy to provide additional comments on the individual sections of the legislation. Number 2365 DENNIS LEWIS, Electric Superintendent, City of Petersburg; Chairman, Four Dam Pool, testified via teleconference from Petersburg. He stated that HB 81 is premature; they need to wait and see what competition brings before they create solutions for it. The communities, at least Petersburg, opted out by election in the middle 1970s from the APUC. The APUC only governs two things in the electric utility in Petersburg; one, the certificate of convenience, which is a service area, and two, if there is a dispute on joint goal agreements. As far as rate goes, with regards to competition, Petersburg is an isolated community and the Mayor and City Council decide the regulations. He cannot see a small community, such as Petersburg, being governed by the APUC. Number 2294 DAVE CARLSON, Board member, Four Dam Pool, testified via teleconference from Petersburg. He noted that he is also a former Mayor and City Council member. He stated that municipalities such as Petersburg presently have the governing powers to deal with the issues at hand. A lot of the issues addressed in HB 81 have come up on a local level and they've dealt with them there. He expressed concern with APUC becoming more involved in the regulation of the utility, because he feels it will raise the level of regulation to a degree of almost redundancy. He pointed out that issues and consumer complaints are handles effectively at the local level and energy is delivered to the consumer at a competitive rate; if he truly thought that the APUC could do a better job then they do locally then he would be forced to believe that the federal government could do a better job regulating fish and game. Number 2228 REPRESENTATIVE ROKEBERG informed Mr. Carlson that HB 81 does not apply to any area that is not under a competitive market situation. He asked Mr. Carlson if he thought that Petersburg would or should be classified as a competitive retail marketplace. MR. CARLSON responded that he didn't understand Representative Rokeberg's question. REPRESENTATIVE ROKEBERG said that he wasn't sure if Mr. Carlson understood the bill, because it only applies to those areas that are in a competitive market circumstance. MR. CARLSON stated that there is not currently any competition in Petersburg, although they still have the same concerns with "cherry picking." If HB 81 is specifically limited to the Railbelt area, then that is another issue, and if Petersburg is truly exempt then he indicated that his comments probably weren't worth much. Number 2156 REPRESENTATIVE COWDERY pointed out that there is competition in the telephone industry. He asked Representative Rokeberg if he thought HB 81 should apply to the telephone industry as well. REPRESENTATIVE ROKEBERG noted that there is not local competition, except in the Anchorage area, and there are certain areas that might be applicable, but he hasn't looked at them yet. CHAIRMAN HUDSON added that there is not only telephone, but also cable. REPRESENTATIVE ROKEBERG explained that these are all consumer protection issues that are suppose to be covered by the regulatory authority, which is the APUC. It is the level and in what context they choose to approach them, and HB 81 speaks to the context of retail electrical service. BOB LOHR, Executive Director, APUC, testified via teleconference from Anchorage. He stated that his staff has prepared a fiscal note for HB 81. They gave it to the APUC to review. The staff estimate is $207.7 thousand fiscal year 2000 and the same level through the year 2003 and then dropping off to zero thereafter. As Representative Rokeberg indicated this is not a cheap or free exercise in terms of the steps involved; number one, the development of very detailed regulations and the crafting of those and, number two, the ongoing response to complaints under the regulations adopted on the local telephone side. The volume of complaints has substantially increased as a result of local competition. Customers have a choice, but in terms of exercising that choice the customers need to have the rights that are provided in this bill, clearly specified, as well as consumer education about what is involved in making a choice of a service provider. In the past it has been a monopoly service and the commission has very carefully regulated the entry into that monopoly market. REPRESENTATIVE PORTER stated that from the testimony received, specifically CVEA's testimony, he is wondering if HB 81, when in place, would kick in when somebody decided to come into a small community and sell a generator. He said if that was the case it would be problematic. CHAIRMAN HUDSON pointed out that they have the option of opting out, so if they opt out then would it or would it not apply. Number 1906 REPRESENTATIVE DAVIES agreed that it is important to define when HB 81 goes into effect. He stated that he would hope that the issue that Representative Porter is referring to would be dealt with under the territorial regulatory powers of APUC and not under HB 81. He noted that he can see where the ambiguity is coming from and thinks that the ambiguity needs to be removed. REPRESENTATIVE ROKEBERG stated that he appreciates Representative Porter's concern and he is not sure whether or not it is handled under the territorial issue. He clarified that the point is that the local utilities can opt out but they can't opt out under territoriality and the provisions in HB 81 would apply to them if there was a competitive situation. If the APUC allows competition they have to look at these issues. He concluded by saying that some of the testimony exhibits the fear and loathing of electrical restructuring and the lack of confidence in the APUC and the concerns about what electric restructuring will do in rural areas. He thinks that it is ironic, because HB 81 is trying to answer those questions, not inflame them, and those people would not be affected unless they were in that situation and then HB 81 would kick in and help. Number 1791 CHAIRMAN HUDSON announced that HB 81 would be held over to the next meeting.
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