Legislature(1993 - 1994)
04/19/1994 08:30 AM Senate FIN
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 213 - APUC EXTENSION AND REGULATORY COST CHARGE
Co-chair Pearce directed that SB 213 be brought on for
discussion and referenced proposed amendments. She then
spoke specifically to Amendment No. 1, requested by
Anchorage Municipal Light and Power, and noted that since no
one had furthered need for the amendment, the assumption is
that it will not be offered. No one indicated to the
contrary.
Co-chair Pearce next directed attention to Amendment No. 2,
proposed by GCI and supported by Co-chair Frank. Senator
Rieger
OFFERED Amendment No. 2 for discussion purposes. He then
questioned the following language:
Bonds or other debt issued to finance unregulated,
competitive ventures by a municipally owned utility
shall not be incurred in a manner that would permit a
creditor, on default, to have recourse to the assets of
the basic regulated utility business.
advising that while it appears, on balance, to be good
policy, arguments could be made either way. He suggested
that it would require much stricter separation of an entity
"that has a regulated monopoly power." Senator Sharp voiced
need for a clear understanding that the legislative intent
is not to allow shifting of costs to any portion of a
regulated monopoly. He said that was the basis of his
support for the amendment. Co-chair Pearce called for a
show of hands on adoption of Amendment No. 2. Amendment No.
2 was ADOPTED with all four members present indicating
support.
Co-chair Pearce announced that while Amendment No. 3 was
logged in, it does not reflect an actual amendment.
Committee attention was directed to Amendment No. 4 by
Senator Sharp. Senator Sharp OFFERED Amendment No. 4 for
discussion purposes. Co-chair Pearce OBJECTED. Senator
Sharp said that he met with APUC representatives and other
interested parties in an attempt to develop "more gentle,
kinder wording" to that inserted by Senate Judiciary.
Research on wording in authorizing statutes from New York
and Wisconsin produced the language proposed in Amendment
No. 4. It is intended to provide APUC the tools it needs to
properly regulate and make emergency decisions on service
areas. Senator Rieger said he was comfortable with existing
language. He then suggested that if the amendment is to be
adopted, the word "necessarily" should be deleted and
"reasonably" inserted in lieu thereof. APUC has given
reasonable examples of need to go beyond the express
granting of power in statute. Senator Rieger then formally
MOVED to change "necessarily" to "reasonably." Co-chair
Pearce called for objections. None were raised, and the
Amendment to Amendment No. 4 was ADOPTED.
[Co-chair Frank arrived at this time.]
FORMER REPRESENTATIVE ALYCE HANLEY, Alaska Public Utilities
Commission Member, and BOB LOHR, Executive Director, Alaska
Public Utilities Commission, came before committee. Mr.
Lohr said that language within Amendment No. 4 "looks
better" following the adopted language change. He
referenced earlier submission of six versions of sample
language based on other utility commissions nationwide as
well as language designed to address environmental issues
and ensure that they do not "come up" as implied powers.
They have to be explicitly granted by the legislature.
As an alternative to Amendment No. 4, Mr. Lohr advised that
existing statutory language could simply be amended by
placing a period after the citation to AS 42.05.711. (See
CSSB 213 (Jud), page 1, line 9.)
Senator Sharp referenced recent judicial decisions stemming
from lack of specificity in terms of powers and duties for
various agencies. Under that decision making process both
the legislature and agencies lose control. He voiced a
preference for inclusion of language that "at least gives
some direction and some legislative intent on what the
duties are . . . ." Co-chair Frank stressed need for
reasonable middle ground and voiced his belief that language
within Amendment No. 4 meets that goal.
[Senator Kerttula arrived at this time.]
Co-chair Pearce called for a show of hands on adoption of
Amendment No. 4. The motion CARRIED on a vote of 5 to 1
(Senator Kerttula was opposed), and Amendment No. 4 was
ADOPTED.
Senator Kelly explained that Amendment No. 5 would delete
language mandating cable television regulation by APUC. He
suggested that the issue represents a policy call that
should be made on its own merits rather than as part of
sunset legislation. At the present time, cable television
may be regulated if regulation is requested. Co-chair
Pearce voiced support for Senate Judiciary inclusion of
cable television regulation. She further advised that the
sunset process is specifically designed to bring policy
calls back before the legislature. Senator Kelly MOVED for
adoption of Amendment No. 5. Co-chair Pearce OBJECTED.
Mrs. Hanley voiced her understanding that Amendment No. 5
would maintain the status quo. Cable television has not
been regulated unless subscribers petition the commission
for regulation. Co-chair Frank voiced his understanding
that in situations where competition cannot be achieved and
the result is a monopoly provider, regulation is somewhat
reluctantly endorsed since it provides a measure of
protection to the public. He then inquired concerning the
philosophy behind deregulation of cable television. Mr.
Lohr said that regulation is less compelling for television
because it is not an essential service as is water or
electricity. The monopoly status is no longer as natural as
it once was in that there is limited competition and
alternative ways of delivering signals. Many local exchange
companies nationwide are "looking at providing cable
service" through fiber optic telephone lines. At that
point, there will be substantial competition for cable
services.
Mr. Lohr next spoke to the implications of excluding basic
tier cable service from regulation. That is the only issue
in question. The federal cable reregulation act of 1992
preempts state regulation of anything (premium channels)
above the basic tier. If the state were to statutorily
exclude basic tier regulation, the federal government, in
regulations under new federal legislation, would preempt the
state, and the FCC would assume jurisdiction over basic tier
channels. Mr. Lohr voiced his understanding that the
amendment would continue to allow subscribers in Alaska to
petition for regulation by APUC. However, if opportunity
for petition is closed, the federal government would preempt
state regulation and would regulate basic tier service from
Washington, D.C., through a cumbersome complaint process
that is not adaptable to local conditions. Co-chair Frank
voiced his understanding that Amendment No. 5 would leave
petition opportunities in tact. Mr. Lohr concurred.
Co-chair Frank said he had heard no good reasons for
exempting cable television from regulation. Senator Kelly
noted that premium channels are regulated by federal law.
Co-chair Frank asked if the federal government also
regulates basic tier service. Mr. Lohr responded
affirmatively, explaining that federal regulation applies in
"any community where effective competition is not found to
exist." Co-chair Pearce voiced her understanding that while
the cost of basic service decreased following passage of
federal law, the package most people subscribe to, which
includes "some sort of a premium channel," increased.
Regulation thus resulted in higher fees. Mr. Lohr explained
that the complex federal formula said that the average
monthly revenues of a cable utility could not increase.
However, the formula allows cable companies to shuffle rates
within that package. Since that time, the FCC issued a
subsequent order resulting in an average 7% reduction. It
was recognized that the original intent of federal
legislation was not being accomplished.
Discussion followed concerning the number of subscribers
needed to petition the APUC for regulation.
Further discussion followed regarding the cost of cable
television regulation. Mr. Lohr explained that regulation
for basic tier would make the company's basic tier gross
revenues subject to the regulatory cross charge of 4/10 of a
percent. Senator Kelly voiced concern raised by utilities
that in addition to the RCC rate, they expend thousands of
dollars for attorneys to put rate-case packets together.
The cost to businesses is higher than merely the RCC rate.
Mr. Lohr concurred that preparation of rate cases involves
both attorneys and accountants. Senator Kelly noted that
this cost is passed on to the consumer.
Co-chair Frank voiced concern that regulation would prevent
additional competition in the market. Further noting the
costs involved and the fact that federal regulation is in
place, the Co-chair voiced support for Senator Kelly's
amendment.
In final comments on the issue, Senator Kelly voiced his
understanding that new federal regulations cover all cable
television premium channels. Mr. Lohr explained that the
regulations apply to all premium channels "for which there
is not effective competition."
Co-chair Pearce called for a show of hands on adoption of
Amendment No. 5. The motion CARRIED on a vote of 4 to 2
(Co-chair Pearce and Senator Rieger were opposed), and
Amendment No. 5 was ADOPTED.
Senator Kelly MOVED that CSSB 213 (Finance) pass from
committee with individual recommendations. No objection
having been raised, CSSB 213 (Finance) was REPORTED OUT of
committee with zero fiscal notes from the Dept. of Revenue
and the Dept. of Commerce and Economic Development. Co-
chairs Pearce and Frank and Senators Kelly, Rieger, and
Sharp signed the committee report with a "do pass"
recommendation. Senator Kerttula signed "no
recommendation."
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