Legislature(1993 - 1994)
03/30/1994 01:48 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
S/JUD - 3/30/94 SENATOR TAYLOR brought SB 213 (APUC EXTENSION AND REGULATORY COST CHARGE) before the committee as the next order of business. JOSH FINK, aide to the Senate Labor & Commerce Committee, addressed changes made to the original bill in the Labor & Commerce CS. In Section 1, the maximum ceiling on the regulatory cost charge was raised from .61 percent of gross revenues to .8. The change in Section 1 was necessitated by the change in Section 2. In Section 2, the cost of power is deleted from electric utilities' gross revenues prior to the application of the regulatory cost charge. Mr. Fink explained that according to the auditor the percent workload committed to electric utilities is about 34 percent. At the time the audit was done, the RCC was at 5.77 percent. The auditor asserted that $192,000 was over collected from electric utilities, that they were being over collected from and there needed to be an adjustment made. Speaking to Section 3, Mr. Fink explained that currently with the regulatory cost there are four quarters that the charges are submitted by the utilities to the Commission. The fourth quarter charges come in after the beginning of the new fiscal year, so if the Commission has overcharged on the regulatory cost charge, that money should count against the following year's cost, but instead it has been lapsing into the general fund. The auditor recommended that the Department of Administration be allowed to earmark that money so that the Legislature can reappropriate in the next fiscal year which will reduce the regulatory cost charge. Number 308 SENATOR DONLEY asked if the audit report included any other utilities. MR. FINK acknowledged that it did, however, the electric utilities were particularly concerned about the over collections so the committee felt that should be addressed, but the other utilities did not bring forward any concerns. Number 370 Addressing Section 4, MR. FINK pointed out that currently, if a regulated utility wants to opt out and 10 percent of the first 5,000 and 3 percent after the first 5,000 subscribers sign a petition, an election will be held. To opt in to become a regulated utility, 25 percent of the subscribers must sign a petition to get an election. The auditor recommended the opt in and opt out procedures be the same, and the change in Section 4 accomplishes that recommendation. Section 5 increases the threshold of gross revenues for an electric or telephone utility before a utility needs to be regulated by changing the amount from $325,000 to $500,000. This was also a change recommended by the auditor, so that small utilities are not as closely regulated as large utilities. Section 6 increases the threshold of gross revenues for other utilities from $100,000 to $150,000 before they need to be regulated. Section 7 increases the threshold of gross revenues for refuse collection utilities from $200,000 to $300,000. It also applies the same opt in standards provided in Section 4. Section 8 makes it easier for the consumers to get an election for cable by changing it from 25 percent of the subscribers to 10 percent of the subscribers. Section 9 is a technical conforming section. Section 10 raises the regulatory cost charge for pipeline carriers from .61 percent to .8 percent for the same rationale that applies to Section 1. Section 11 identifies over collection from the pipeline carrier's regulatory cost charge so that it may be applied to the next year to reduce the regulatory cost charge. Section 12 is an extension of the Alaska Public Utilities Commission from June 30, 1994, to June 30, 1998. Section 13 repeals the sunset of the regulatory cost charges, the rationale being that when the Commission is under sunset review, the regulatory cost charge can be addressed at that time. When the regulatory cost charge was passed it set a sunset date of December 31, 1994, exclusive of the APUC sunset. Section 14 staggers the terms of the members of the Alaska Public Utilities Commission. Currently, two members of the commission terms expire on the same year. The section was drafted so that it won't affect any current sitting members, but will apply to the next round of appointments. Right now, one of the consumer seats and one of the engineering seats expire at the same time. Number 505 DAVE HUTCHENS, Executive Director, Alaska Rural Electric Cooperative Association, stated that there were issues related to the legislation that he wanted to address. The first issue is whether or not the APUC should be extended, and ARECA's view is that should be. APUC was created with the charge of separating out the service areas and to protect the consumer interest. The second issue relates to the section in the committee substitute which relates to the regulatory cost charge formula. He said the at the present time, the regulatory cost charge is based on a flat charge per revenue, and the workload and the revenue requirements from RCC don't match very well. The change to the formula was recommended by ARECA. He directed attention to and reviewed a handout containing a summary of the changes that would result from changing the RCC. TAPE 94-28, SIDE B Number 010 The third issue relates to Section 1 of the proposed Judiciary CS, which would eliminate the phrase "liberally construed" from the present APUC statute and replace it with the directive that their statutes be "those specifically conferred by statute or necessarily implied by a statutory grant of authority." ARECA believes that it important that the powers of the Commission be those that the Legislature determines them to be; that the Commission should not be able to expand their authority by interpretation and by liberally construing their powers. Mr. Hutchens emphasized that ARECA does not have a problem with the present Commission, but they see this as preventative maintenance to keep from having problems in the future. Also, he suggested an effective date be added making Section 1 effective July 1, l995, which would give the Commission time to come back to the Legislature with a list of the things that they don't have clear statutory authority to do, but that they are now doing. The items on that list that the Legislature agrees with could be enacted next year before this would go into effect. Number 055 DON SCHROER, Chairman, Alaska Public Utilities Commission, stated that aside from the "liberally construed" section, the Commission doesn't have any large objections to the bill. Number 063 SENATOR TAYLOR asked Mr. Schroer, for the record, except for Section 1, did APUC agree with the housekeeping measures contained in the committee substitute, and MR. SCHROER acknowledged that they do. MR. SCHROER said the APUC has no quarrel whether they are financed by RCC or under the general fund. Their goal is to keep it as simple as possible. They have it working now, and they have done so without asking for additional funding. Number 086 MR. SCHROER requested that the following statement on the "liberally construed" language be included as part of the record: "HB 213 would extend the Alaska Public Utilities Commission and the Regulatory Cost Charge that funds it until 1998. An amendment may be proposed to delete the phrase "liberally construed" from he Commission's enabling statute. The Commission opposes this amendment." "Routinely the Commission allows interim rates to go into effect without requiring the utility to escrow funds or pose a bond under AS 42.05.421(c). It does this by making rates interim refundable, which again benefits the utility. The authority for this is "liberally construed." "The courts have not used the term "liberally construed" very often (only eight times). Where they have, it has been to the benefit of utilities in half of the cases." "The Commission itself has only discussed the issue of "liberally construed" nine times in 25 years. In at least three of these cases, the Commission acted to allow the intention of the utility or applicant for a certificate to be accomplished by waiving technical irregularities. In another, the Commission found that it did not have statutory authority to recognize a doctrine of "retained rights" requested by a telephone utility under statute, despite "liberally construed." "Often the Commission has granted "temporary operating authority" to a utility while its application for a certificate is pending Both the customers and the utility benefit, but the authority for temporary certificates is not explicit. It comes from "liberally construed." "Many utilities face increased competition as the result of changes in technology and federal law. The Commission needs the flexibility that "liberally construed" provides to allow existing utilities to compete on an equal footing." "Regulatory statutes are generally drafted broadly. Legislators cannot foresee every problem that will arise in administering a statute and the liberally construed language gives regulators the flexibility to resolve these problems. The Legislature sets the goals and the policies, leaving the implementation of the program to the commission. The budget process and the sunset review process provide plenty of room for legislative oversight." "Justice Frankfurter recognized that administrative agencies were created to perform a task, which neither courts nor legislatures could accomplish, to regulate the practices of industries in a rapidly changing world. The same considerations that led to the creation of the Public Utilities Commission led the Legislature to authorize their implied powers to be liberally construed." "Deletion of this phrase would lead to strict construction of implied powers. This means that legislation would be required whenever a court finds a gap in an agency's power. This forces the Legislature back into the regulatory role that they sought to escape by creating the Commission in the first place. Removing "liberally construed" from the Commission's powers and duties section would have impacts well beyond statutory construction in the courts." Number 090 Mr. Schroer recommended that if the "liberally construed" language is removed from the bill that other changes be made in the statute. If that language is removed, the Commission will not be able to give any temporary operating authority as they have done in the past. Also, when a utility asks for a rate increase, the APUC makes them in term refundable. The law provides for them to be in term, but then the utility must put up a bond or set up an escrow. The Commission liberally construes that's not necessary. Mr Schroer stated he doesn't believe that any utility has ever suffered because of the "liberally construed" language, and he doesn't see any reason to change it when there hasn't been any problem with it. Number 150 SENATOR TAYLOR asked if there was a motion to adopt the Judiciary CS. SENATOR HALFORD moved that CSSB 213(JUD) be adopted. SENATOR DONLEY objected and asked that the differences in the committee substitute be outlined. Number 180 There was discussion on adding an effective date to the legislation, as well as discussion on the section relating to staggered terms. Number 235 SENATOR DONLEY maintained his objection to the adoption of CSSB 213(JUD) stating he agrees with Mr. Schroer that the APUC needs the "liberally construed" authority. SENATOR HALFORD suggested adding the one-year delayed effective date so that APUC could come back with a proposal. The Chairman called for a roll call vote on the motion to adopt the committee substitute: Senators Halford, Jacko and Taylor voted "Yea" and Senators Little and Donley voted "Nay." The Chairman stated the motion carried. Number 285 SENATOR Taylor moved that an effective date of July 1, 1994 be added to the committee substitute. Hearing no objection, the amendment was adopted. Number 306 SENATOR DONLEY moved that Section 1 of the committee substitute be deleted. SENATOR HALFORD objected. The roll was taken with the following result: Senator Donley voted "Yea" and Senators Jacko, Little, Taylor and Halford voted "Nay." The Chairman stated the motion failed. Number 335 SENATOR HALFORD moved that an effective date for Section 1 of July 1, 1995 be added. Hearing no objection, the Chairman stated the amendment was adopted. Number 372 SENATOR DONLEY proposed a conceptual amendment to set out a separate section for cable television regulation that would automatically put cable television under the APUC except if they follow the opt-out procedure. SENATOR HALFORD voiced his concern with regulating cable television and what the cost of it would be. The committee then discussed a conceptual amendment that would take away cable television's monopoly. SENATOR TAYLOR stated the conceptual amendment was to remove from regulation cable television, which would remove from the authority of the APUC the opportunity to regulate the geographic area, or the basic package, or entry. SENATOR DONLEY questioned how this would affect FCC requirements. SENATOR TAYLOR directed staff to request a legal opinion as well as draft language on the conceptual amendment. Number 540 SENATOR DONLEY said he wanted to propose a conceptual amendment to delete the portions of the bill that create a dichotomy between electrical utilities and other utilities. He then moved to delete Sections 2, 3 & 11 of the draft committee substitute. SENATOR JACKO objected. The roll was taken with the following result: Senator Donley voted "Yea" and Senators Jacko, Little, Taylor and Halford voted "Nay." The Chairman stated the motion failed. There being no further amendments to the bill, SENATOR TAYLOR stated SB 213 would be held to get a response back on the question of cable television, as well as additional drafting to the committee substitute.