Legislature(2005 - 2006)SENATE FINANCE 532
05/06/2005 09:00 AM Senate FINANCE
Audio | Topic |
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Start | |
SB73 | |
SB157 | |
HB54 | |
HB286 | |
HB98 | |
HB218 | |
SB157 | |
HB147 | |
HB218 | |
SB46 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+ | SB 73 | TELECONFERENCED | |
+ | SB 74 | TELECONFERENCED | |
+ | HB 98 | TELECONFERENCED | |
+ | HB 147 | TELECONFERENCED | |
+ | HB 54 | TELECONFERENCED | |
+ | HB 286 | TELECONFERENCED | |
+ | HB 218 | TELECONFERENCED | |
+= | HB 275 | TELECONFERENCED | |
= | SB 46 | ||
SENATE BILL NO. 157 "An Act relating to the maximum annual regulatory cost charge collected from certain regulated public utilities and pipeline carriers; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Green noted that this legislation, which was requested by Governor Frank Murkowski, would relate "to an Act pertaining to the maximum annual regulatory cost charge collected from certain regulated public utilities." Co-Chair Wilken moved to adopt committee substitute Version 24- GS1138\F as the working document. There no objection, Version "F" was ADOPTED as the working draft. 10:07:02 AM KATE GIARD, Chairman, Regulatory Commission of Alaska (RCA), Department of Commerce, Community and Economic Development, spoke to the Regulatory Commission and the reason for the development of this bill. When she became an RCA commissioner in June 2003, she had understood "that there were a lot of challenges that the public, the utilities, and the Legislature had with the overall functionality" of the Commission. She was elected chair of the Commission in July 2004, on a platform focusing on addressing those issues. Since that time, she had held discussions with public utilities, pipeline companies, and Legislators to determine "the issues that were driving some of" those entities' major concerns about the RCA. Ms. Giard stated that "the overall goal was to identify and form working groups to work together to address" those concerns before hearings on whether to terminate or continue the Commission occurred in two years' time. The effort would be considered "successful" were the forthcoming hearings to not include the "plethora of issues" that such hearings have had in the past. "Strategies and plans" have been formulated in this regard, including the Regulatory Cost Charge (RCC) rate increase proposal contained in this legislation. Other efforts would include addressing regulations and encouraging public comments on RCA activities. These processes would continue over the next two years. 10:09:40 AM Ms. Giard explained that this legislation would increase the RCC rate "by two-tenths of one-percent, from seven to nine for a three year period." This would provide funding through which the RCA could acquire new systems to improve the efficiently of RCA operations. RCA has not, to this point, invested in such systems and is lagging behind current data processing trends. This has prevented the RCA from completing its workload. To this point, she noted that, due to a lack of systems and reporting capabilities, she, as chairman, is uninformed about "the day-to-day activities" of RCA staff. "That translates to you hearing that we're not getting our orders out promptly, that utilities don't know where things are in the process, and that it takes an extremely long time to get an order and answer from the RCA." Ms. Giard stated that the Legislature has heard from many utilities in regard "to the many challenges" they have experienced in getting information from the RCA. Such issues are not insurmountable; the RCA is capable of providing the information, and the implementation of updated systems would assist this effort. 10:11:09 AM Ms. Giard stated that discussions with utilities in regards to this RCC funding mechanism have transpired. To alleviate their initial "discomfort" with the idea, the utilities asked that an advisory group be developed. Thus an advisory group, comprised of utilities, was formed in January 2005. That group reviewed the RCA strategy and helped formulate a plan. As a result, the utilities have become more comfortable that RCA would update their system to deliver the services that the utilities require, including the system ability that would allow the utilities to transmit data to the RCA electronically. One utility, Chugach Electric, had to manually provide 65,000 documents pertaining to a recent rate case to the RCA. This RCC rate increase would serve to address these issues. Ms. Giard explained that, as specified in State Statute, the RCC monies that are collected are deposited into the RCA's operating fund rather than its capital fund. RCC fees are collected from the utilities and the pipeline companies who collect them from their ratepayers. Were RCA to not spend the entirety of the fees collected in a given year, this practice would allow that balance to be reflected in the operating budget. That balance would serve to reduce the amount of RCC fees that the ratepayers would pay the following year. In contrast, depositing the fees into the RCA capital fund account would not have "that impact on the ratepayer". Thus, any money remaining after the purchase of the new systems would serve to reduce the RCC rate the following year. The money would not be used to hire additional staff or other expenses. Ms. Giard noted that the advisory group would continue to meet with the RCA until the system upgrade concluded. Ms. Giard concluded by commenting that she would welcome Committee questions about the RCA or the bill. 10:13:45 AM Co-Chair Green voiced appreciation for Ms. Giard's testimony. Ms. Giard pointed out, for the record, the fact that typically RCA legislation is a point of controversy. This legislation is contrary to the norm as the efforts in its regard were conducted in cooperation with the utilities. "We owe any success that results from this venture to those pipeline companies and utilities that did participate and that did respectfully say we support this and we are going to not move forward and take any advantage of this situation." Ms. Giard voiced her support of an [unspecified] amendment that was developed during the process as she deemed it as being "good public policy". It did not "have the Christmas tree affect" that could have happened. She voiced appreciation for the efforts exerted by the Legislature, the pipeline companies, and the utilities. 10:15:37 AM Co-Chair Green commented that when she initially heard about this legislation, she thought that this "was just another method by which our ratepayers" would pay more to the utilities who would "pay more for something". However, the volume of documents that the RCA process entails is expansive and the fact that it is currently conducted manually is unacceptable in today's work environment. In addition the RCA is currently unable to change and edit as the process unfolds. She voiced her support of this legislation, as it would serve to update the process. Co-Chair Wilken opined that the title change included in Version "F" appears to be the result of language included in Sec. 3, page two, lines 15 through 22. That language would "appear to indemnify public utilities for damages that may or may not have been caused by operating a transmission line." 10:17:02 AM Co-Chair Wilken asked whether Ms. Giard was familiar with the language in Sec. 3 regarding "the prohibition on the ability of the Regulatory Commission of Alaska to order electric utilities to operate their systems different than design or safety standards and relieving the utility of liability in order to operate in such a manner." Ms. Giard asked for further clarification of the question. Co-Chair Wilken stated that his question was to whether she was "familiar with Sec. 3." Ms. Giard replied that she was familiar with the section. Co-Chair Wilken then asked whether it was her "understanding that the amendment is directed at the manner in which RCA is requiring that the 20-mile segment of the transmission line that is owned and operated by Matanuska Electric Association" [MEA]. 10:17:42 AM Ms. Giard replied in the affirmative. Co-Chair Wilken asked whether "the line at issue" is "used as part of the Alaska intertie which is the major transmission line between Anchorage utilities and the northern interior of the State." 10:17:56 AM Ms. Giard affirmed that it was. Co-Chair Wilken asked how long that line has been in operation. Ms. Giard responded that that line has been in operation for approximately 20 years. Co-Chair Wilken asked whether the RCA had conducted hearings in regards to "the manner involving the manner in which MEA was intending to operate that line." Ms. Giard affirmed that hearings were held in that regard. Co-Chair Wilken asked who had participated in those hearings. Ms. Giard stated that RCA had issued Order #4, Docket No. U-03-100 [copy not provided] in this regard. The parties involved in that proceeding were the Chugach Electric Association, Inc.(CEA); Golden Valley Electric Association, Inc. (GVEA); the Municipality of Anchorage d/b/a Municipal Light and Power [MLP], the City of Seward, and MEA. Co-Chair Wilken asked whether "experts" attended that hearing. Ms. Giard responded yes; it is the norm that experts "on both sides" attend such hearings. Co-Chair Wilken asked whether "the designer of that line testified." Ms. Giard stated that, "as this particular order has been appealed to the Superior Court", it would be difficult to delve into the details of that hearing. However, she would be able to discuss Sec. 3 and provide its historical background. 10:19:14 AM Ms. Giard informed the Committee that the original Senate and House of Representatives companion bills that had been introduced this session had simply focused on the RCC. Recently, however, MEA raised concerns about the aforementioned order issued by the RCA. "MEA had proposed initially that they would like this order to be overturned. That is a public policy issue, which the RCA could not support." One of the primary concerns raised by MEA pertained to the RCA interconnection order that utilizes approximately 20 to 26 miles of MEA lines, called TLS lines. Those 20 miles of MEA's TLS lines have been under contract for the intertie transmittal during the 20 years since the inception of the intertie, as, since "funding was low", utilizing the MEA TLS line was deemed to be the most efficient transmittal option. Ms. Giard continued that MEA indicated that they "would no longer be able to offer that service to the intertie because they weren't able to negotiate terms and conditions MEA was comfortable with." RCA conducted a hearing "and issued an Order stating and requiring MEA to interconnect." A copy of the Order could be provided. 10:20:57 AM Ms. Giard noted that MEA had raised safety concerns about the line, due to RCA ordering that MEA "connect the line and run the transmit kilowatts at 138." The line was originally designed for 115 kilowatts (KV). During her recent conversations "with MEA about their concerns and their desire to have the Order overturned within the Legislative process," she explained that that would be "bad public policy because there is a mechanism the Legislature put in place for MEA or any public utility or pipeline to deal with orders that they do not like that are issued from the RCA." That process would entail appealing the RCA decision to the Superior Court and then to the Supreme Court. The Courts would decide whether or not RCA had "done our job well." Ms. Giard stated that MEA understood the public policy issue concerns and chose not "to violate them." The underlying MEA concern was in regards to "their liability". They have provided their service to the State of Alaska, however, were someone to be injured with that line being run at a 138-kilowatt voltage "the utility stands in place of the intertie. The State of Alaska stands in place for the rest of the intertie through the" Alaska Energy Authority (AEA). Ms. Giard communicated that it would be deemed good public policy, and policy that should have been enacted 20 years earlier when the MEA line was originally used for the intertie, "that if this line does cause liability while it is being used as intertie, and there is some discussion underway that it would only be used for the next three to five years under this mechanism, that it is good public policy that this public utility not be held more accountable or more liable than other utilities along the Railbelt." It was then necessary to communicate this public policy to the other utilities connecting to that intertie including GVEA, CEA, and MLP. Ms. Giard continued that in a matter of the last 48 hours, this information had been conveyed to the other utilities. She agreed with the other utilities that this issue would have been better served had MEA presented their concern earlier. However, she understood MEA's position that, since the Order had been under appeal to the Superior Court, it would have been inappropriate to address it earlier. This is a fair account of what has transpired in last 48 hours. RCA and the Office of the Governor have determined that the language changes included in Sec. 3 of Version "F" would be acceptable. 10:25:04 AM Co-Chair Green asked whether the Department of Law and RCA attorneys had been involved in the discussions, specifically whether those entities deemed the Sec. 3 language as being "workable". 10:25:24 AM Ms. Giard assured that the Attorney Generals Office, AEA's legal representative, the Department of Law, and the Legislative Legal & Research Division were involved in the recent discussions. It has undergone the appropriate review. 10:25:58 AM Co-Chair Wilken concluded therefore that the language in the bill would serve as "an end run around the RCA decision" and "would indemnify a certain utility for their future actions in regards to operating this asset." To that point, he asked for confirmation that neither RCA nor Governor Frank Murkowski had any concerns in regards to the language contained in Sec. 3 and were, in fact, "supportive of it." Ms. Giard expressed that she had "strongly and sternly spoken to MEA about the 'end run' issue." To that point, she viewed end runs as not being "uncommon. It is probably a normal part of a process that" she "was not particularly familiar with". She stated that she focuses on the end result: "is the end result good public policy that the Governors Office stood behind". The determination that this was good public policy was the conclusion reached at the end of the past 48 hours. She would be unable to recommend that the Committee advance this action otherwise. Co-Chair Wilken acknowledged. Senator Dyson voiced having "a different perspective on this; it may indeed be 'an end run' in a way that I don't perceive." 10:28:15 AM Co-Chair Green interrupted Senator Dyson's comments to note that the Committee, in its questioning, should be conscious of restrictions that might be placed on Ms. Giard and RCA due to the pending Superior Court decision. Senator Dyson spoke in regards to the fact that RCA was asking MEA to transmit 138 KV on a line designed to transmit 115 KV. RCA had determined that the line was capable of handling the increased voltage. The owner of the line viewed it as being marginal; "it is not the recommendation of the national electric safety code." He understood "that that section of line has had a considerable number of outages." Therefore, it would not be unreasonable in a case where a governmental agency "forced" an entity "to operate on the edges of good national standards" ? "for that group to say hey over our protest, you are asking us to do something that's outside of what would be normal recommended practice, and we want to be held harmless if we do what we are ordered to do that outside of national recognized standards". In conclusion, he viewed the language in Sec. 3 as offering "reasonable protection for this utility". Senator Dyson informed the Committee that his background included working as a construction lineman and in electric power maintenance. He noted that arching between lines and insulators is an issue dependent "on atmospheric conditions." He "suspected" that while the line in question is located in an area that is relatively dry, "moisture in and around the dew point" could cause problems. This, combined with other factors such as line age and wind, could be troublesome. 10:30:50 AM Senator Olson voiced being uncomfortable with the fact that RCA is requesting that a line exceed its capabilities. He compared this to an airplane directed to fly with a load exceeding its specific design weight. While the aircraft might be designed with margins on its load, being directed to do so might result in the eventual failure of the aircraft. This might be the situation that is causing the power outages on that line. Senator Olson noted that he had some familiarity with power lines as his father had operated a small community's generator. To that point, he understood that there were methods, such as the installation of transformers, through which the voltage of a line could be increased within the parameters of the designed voltage. 10:32:14 AM Ms. Giard stated that those issues were discussed at the hearing and with MEA. Like the Legislature, the RCA has the ability "to hear a complete record" of an issue "and weigh and balance and decide" in its regard. Some decisions could be "really good" and others could be "really bad", and the process that would allow RCA decisions to be heard by the Superior Court would be the determining factor in regards to this RCA decision. MEA is aware of this process and the other parties understand that there are "mitigating circumstances". All these factors were weighed in the RCA decision. Ms. Giard displayed a thick binder containing the transcripts of the hearing proceeding. The Superior Court would decide whether the RCA decision in this issue was right or wrong. Co-Chair Green asked for confirmation that the other public utilities had been included in the discussions. Ms. Giard affirmed that she and the Governor's Office have actively communicated with the other entities. She shared the understanding that those entities also viewed the language in Sec. 3 as good public policy, "but were disenchanted with the process". The focus should be on the fact that the legislation being offered today "is good for the State of Alaska." 10:34:40 AM BRIAN BJORKQUIST, Senior Assistant Attorney General, Labor and State Affairs Section, Civil Division (Anchorage), Department of Law testified via teleconference from an offnet site and noted that he had just reviewed Version "F". However, the language in Version "F" is missing the intended intent, which was "to limit the immunity from liability to the extent that the damage was caused by the operation of the line either inconsistent with its original design standards or in a manner that was a violation or inconsistent with the national safety code." As written, Version "F" would "provide complete immunity to the utility for any damage that might be caused by the operation of the utility or the transmission line regardless of whether it would have anything to do with the difference or the inconsistency with the design standard or the national electric safety code." Mr. Bjorkquist stated that this would be a concern. 10:36:01 AM Senator Dyson asked Mr. Bjorkquist for a recommendation in this regard. Mr. Bjorkquist stated that he would work on developing the appropriate language. "The basic concept is that the public utility would not be liable for any damages caused to the extent that the damage was caused by the operation of the transmission line at a voltage that is inconsistent with either the original design standards or the national safety code; and also that the Regulatory Commission of Alaska would be ordering that." 10:37:09 AM Senator Dyson deferred to Mr. Bjorkquist's judgment even though Senator Dyson thought that the concern was sufficiently addressed in Sec. 3. 10:37:28 AM Co-Chair Green asked that RCA confer with Mr. Bjorkquist and the Administration in this regard. Ms. Giard concurred. The issue would be readdressed and be brought back to the Committee. Co-Chair Green ordered the bill HELD in Committee. [NOTE: This legislation is readdressed at Time Stamp 4:37:15 PM.] 10:38:06 AM SENATE BILL NO. 157 "An Act relating to the maximum annual regulatory cost charge collected from certain regulated public utilities and pipeline carriers; and providing for an effective date." This bill was again before the Committee. Co-Chair Green stated that the questions that had been brought forward earlier by the Attorney Generals Office in regards to Sec. 3 of Version "F" would be addressed. Senator Stedman moved to adopt committee substitute Version 24- GS1138\Y as the working document. Co-Chair Green objected for explanation. 4:38:24 PM BRIAN BJORKQUIST, Senior Assistant Attorney General, Labor and State Affairs Section, Civil Division (Anchorage), Department of Law testified via teleconference from an offnet site and noted that language has been revised in Sec. 3, page two, lines 14 through 22, in order to clarify the limitation on liability for the owner of the transmission line. The intent of this language would be to specify that the transmission line owner "would not be liable to the extent of the damage caused by the operation of that voltage that exceeds the original design standards or if the voltage violates the applicable standards of the national electric safety code". KATE GIARD, Chairman, Regulatory Commission of Alaska (RCA), Department of Commerce, Community and Economic Development noted that she had no further testimony. Co-Chair Green voiced appreciation for the efforts that had been exerted to correct the Sec. 3 language conflict. [NOTE: While Co-Chair Green did not formally remove her objection to the adoption of the Version "Y" committee substitute, that was the implied intent.] Senator Stedman moved to report the bill from Committee with individual recommendations and accompanying fiscal notes. There being no objections, SC SB 157 (FIN) was REPORTED from Committee with $1,300 fiscal note #2 dated April 7, 2005 from the Department of Commerce, Community and Economic Development. 4:40:29 PM AT EASE: 4:40:46 PM/ 4:41:25 PM
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