Legislature(1993 - 1994)

04/19/1994 08:30 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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                 
  Co-chair Pearce next directed attention  to Amendment No. 2,                 
  proposed  by GCI and  supported by Co-chair  Frank.  Senator                 
  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                 
  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                 
  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                 
  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                 
  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                 

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