Legislature(1997 - 1998)
04/21/1998 01:35 PM Senate L&C
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SB 355 - COMPETITIVE RETAIL SALES ELEC. POWER
CHAIRMAN LEMAN brought SB 355, which was introduced by the Labor
and Commerce Committee, before the committee. He noted that in the
interest of accommodating other legislators who had expressed some
concerns about other regions of the state, it has been crafted to
apply only to Anchorage.
DON EDWARDS, representing Chugach Electric Association in
Anchorage, said Chugach has been pushing hard this last year for
developing the customer's right and implementing the customer's
right, which they believe they have under law, to choose electric
service providers. SB 355 allows customers to get access
immediately over utility systems which meet the density
requirement. This would apply to Municipal Light and Power (ML&P)
and Chugach Electric Association (CEA) service territories.
MR. EDWARDS said SB 355 is very narrowly drafted to simply trigger
off competition. It allows and requires that when a request is
made for access over a dense system, that the access be given on a
very expedited basis. A poll conducted by Chugach Electric shows
that well over 90 percent of its customers understand and believe
that they'll benefit and believe that they should have the right to
choose electric service providers.
MR. EDWARDS said this is not a complicated process. He explained
that in CEAs situation, they have a couple of customers in ML&P
service territory. When those customers want to buy power from
Chugach, Chugach pays ML&P a price established by the commission
for access across its system. For the larger customers, equipment
is installed, which allows CEAs' generators to automatically
follow their load and generate for their load. For the smaller
customers, CEA has plenty of load research data to be able to
estimate what their load looks like at any given point in the day,
and the generators are scheduled to meet that load.
Last June, ML&P requested an expansion of its service territory,
and Chugach asked the APUC if it would pronounce whether or not
service territories are exclusive. CEA simply asked the commission
to affirm that an expansion of the ML&P territory was not a step
against competition and would still allow customers to choose, but
the commission declined to answer that question. Over the summer
Chugach went out and sought customers who were interested in
purchasing from Chugach and then presented those customers to ML&P
and asked for access. ML&P has refused access and brought an
action in front of the commission asking that CEA be prevented from
competing, but there is still no decision on that action.
MR. EDWARDS said federal law says that competition is the rule, and
the only way you can get past that rule is that if the state
establishes a policy against competition. The courts have been
very strict about that and have said you are only successful in
establishing a policy against competition if it is very, very
clearly articulated and affirmatively expressed, so that is why
Chugach believes that very little change is needed in legislation,
and why they believe that customers have a current, enforceable
right to choose today.
MR. EDWARDS referenced a Brookings Institute study and five points
that study reaches.
(1) All customers benefited in those industries which had gone
from monopoly to greater competition, and the benefits
increase over time.
(2) Under competition services and reliability improve.
(3) The more choice allowed, the more savings result.
(4) The best way for all customers to benefit from competition is
to make sure that all customers have the right to choose.
(5) It's impossible to predict either the likely resulting market
structure, after competition begins, or even what the optimum
market structure should be, but competition should just be
allowed to work under some basic rules and to let it develop
its own structure.
MR. EDWARDS stated it is CEA's view that the APUC already has all
the authority it needs to oversee and decide on access charges and
any other issues that might arise. He stressed the important
thing is to get started and to develop a kind of track record so
that if additional legislation or regulatory changes might be
required, it is being done on the basis of actual experience rather
than on the basis of conjecture or fears.
Number 312
CHAIRMAN LEMAN noted that in a Senate Finance subcommittee meeting,
APUC Chairman Sam Cotton confirmed his belief that the APUC
currently has the authority, but he also expressed reticence to
move too quickly into it because of a number of issues the APUC is
wrestling with. CHAIRMAN LEMAN then asked Mr. Edwards that if
competition is good, should it be restricted to those utilities
that are certificated now, or should it be available to those
power marketers, retailers and aggregators as well as electric
utilities. MR. EDWARDS responded that the legislation has been
written to address certificated utilities because, presumably,
those utilities have already been through whatever screening or
consumer protection assurances needed to protect the public, so
they felt that the path of least resistance was to allow
certificated utilities, who have already been through that process,
to be authorized to compete. Chugach is in favor of competition,
and knows that there is at least one power marketer active in
Anchorage right now. He emphasized that Chugach is not trying to
avoid having those competitors, but just trying to avoid further
delays with going through a process to decide how to resolve some
of those issues that are raised when they are brought into the mix.
Number 363
SENATOR KELLY asked who owns Chugach Electric, as well as who owns
ML&P. MR. EDWARDS related that Chugach is a private corporation
owned by its members, which are also its consumers and past
consumers. ML&P is owned by the Municipality of Anchorage.
Number 380
MEERA KOHLER, General Manager of Municipal Light & Power for the
Municipality of Anchorage, stated SB 355 is another example of
Chugach Electric Association's determination to bypass the
legislative and regulatory processes in order to fast track retail
electric competition in Anchorage. She said the question must be
asked why it is so imperative to immediately implement competition
in Anchorage.
MS. KOHLER pointed out that Chugach is the operator of most of the
transmission systems that interconnect the six utilities serving
Railbelt Alaska. Over 55 percent of CEA's energy sales are full
sales or economy energy. Chugach already has what is called market
power in the market that they would essentially like to compete in.
The prerequisite for retail competition, wholesale competition,
does not yet exist in Alaska. She further noted that the Chugach
and ML&P retail rates are almost identical. In other words, the
competitive forces are already at work to keep their rates on par.
MS. KOHLER said Chugach lacks the benevolence to write the rules
and to set the monetary parameters that govern a competitive
electric market. The issue is of significant importance to every
resident of the state of Alaska. It has taken years for the huge
interconnected markets of the Lower 48 to tentatively experiment
with competition, and not a single state has yet proven that it can
work.
MS. KOHLER urged the committee to allow the Legislature to fully
examine the issues of retail electric competition, and to come
forth with a decision on whether and how to implement this. She
said Anchorage is not a suitable pilot project for such an
undertaking, not when half of the state's population and 60 percent
of its generation resources are the guinea pigs.
Number 420
SENATOR KELLY asked Ms. Kohler what she would be saying if ML&P did
want to be competitive. MS. KOHLER responded ML&P is saying that
the Legislature and the APUC are at an arms length and need to
examine the issues that would be involved with deregulation and
competition, and that they can set the rules and tell ML&P how it
ought to compete.
SENATOR MACKIE said his understanding is that the legislation
simply asks the commission to make an expedited decision. MS.
KOHLER responded that the bill provides that if one utility
requests the opportunity to serve in another utility's territory,
then the APUC has 10 days to return its decision on whether that
competition is to be allowed, which, she said, is ridiculous. The
APUC already has the power to rule on whether or not competition in
a particular service area is in the best interest of the public,
but the legislation is expediting that to a very small time frame.
SENATOR MACKIE asked Ms. Kohler if there was a particular time
frame that she thought would be more reasonable. MS. KOHLER
replied that once the APUC and the Legislature have determined
whether or not competition is a desirable thing in certificated
public utilities' territories, that beyond that phase it ought to
be committed within a fairly short period of time, but not to
bypass the initial process.
Number 455
MARY ANN PEASE, Vice President of Aurora Power in Anchorage, stated
Aurora is the largest independent natural gas marketer in the
state, supplying close to 80 percent of the large commercial
markets in Anchorage. She stated the intent of SB 355 is a
definite step in the right direction in as much as it provides for
the opening up of the distribution and transmission systems in the
Anchorage area. However, where the bill falls very short is in the
restrictive language that limits competition to the existing
generating providers in the Anchorage area, ML&P and Chugach
Electric.
MS. PEASE said the entire spirit and core of competition is to
enable various entities the right to compete to provide service at
lower rates than currently available, and there are several
entities that could participate in bringing reduced electric rates
to consumers in Anchorage. The pilot program that Aurora Power
will be proposing before APUC enables a study approach to
competition on a limited basis, and the pilot program could not be
approved unless power providers have access to the distribution and
transmission systems in the Anchorage area. The opportunity to
provide reduced cost electricity is timely and needs to happen now
rather than two or three years from now.
MS. PEASE suggested passage of SB 355 with some minor changes that
would allow resellers, aggregators, and power marketers to have
access to that power as well as the two existing generating
utilities.
Number 495
CHAIRMAN LEMAN asked Ms. Pease what her company has to prove to the
APUC to allow them to compete in the Alaska marketplace. MS. PEASE
explained that Aurora Power has a tariff it has filed in
conjunction with Enstar that enables it to provide natural gas to
any of the large commercial users in Anchorage, and she envisioned
a similar approach for electricity. She added that Aurora would
not exclude APUC from this process at all, and realize that APUC's
authority over it is critical to the success of restructuring.
CHAIRMAN LEMAN asked Ms. Pease her comments on a proposed amendment
which makes two changes to the legislation. It picks up the power
marketers, resellers, and aggregators, and it changes the 10 days
to 30 days. MS. PEASE said she thinks the 30-day period is much
more reasonable and makes it a workable situation. She also
supports the pilot program language in the amendment.
CHAIRMAN LEMAN asked Ms. Pease if the commission or a proposer were
to identify a portion of the service areas within Anchorage where
there is overlap of ML&P and Chugach Electric, but perhaps it
doesn't include the entire municipality, and use that as the pilot
area, is that a concept Aurora Power could support and be
interested in participating in. MS. PEASE acknowledged they would
support that.
JIM POSEY, Commissioner, Alaska Public Utilities Commission,
testifying from Anchorage, said the commission currently has two
dockets open to deal with competition in Alaska. He agreed the
commission has the power to do what's necessary within a limited
vein of looking at competition as one would consider it in the
state. He pointed out that in California, after two years of
planning and delays of several months, people are still confused
as to what it really means and what it really means to them. He
said consumer education is a big part in order to prevent confusing
the customers.
MR. POSEY said the commission feels that as it looks at
competition, which is a different format for Alaska, especially
Anchorage given the makeup of the potential competitors, that the
APUC may need some legislative help to sort out some of the
answers. The commission would like to work as a partnership with
the Legislature if it runs into problems dealing with the issue,
given the current dockets that it has. He added that the APUC
would like to think that they would not need the help of the
Legislature, but given the tremendous investment that the two
parties in Anchorage have in generating and transmission, to not
move too quickly on this issue is probably the prudent way to
operate.
Number 555
ERIC YOULD, Executive Director, Alaska Rural Electric Cooperative
Association, testifying from Anchorage, stated the electric utility
industry in Alaska, with the exception of Chugach Electric, is
opposed to SB 355. That is not to say that ultimately the utility
industry does not see the benefits of restructuring and realize it
is an issue that is being considered nationwide as well as in the
state of Alaska. However, it has been considered nationwide for a
number of years, and, still, Congress has not passed a piece of
legislation because it is a very complex issue.
TAPE 98-23, SIDE B
Number 005
Speaking to deregulation, MR. YOULD noted 10 states have passed
some comprehensive deregulation, 23 states have taken the position
of substantive investigations through their own committee
processes, nine states have requested that their utility
commissions address the issue and come up with recommendations
for their legislatures, and the remaining states have essentially
taken no action whatsoever. He said it is a very difficult
situation and one which is going to take some deliberate
consideration by the Legislature.
MR. YOULD agreed the APUC has a certain authority to allow retail
wheeling. However, because of the potential impacts, nobody has
really looked at the bounds that should be put on it or the
criteria that should be established. He said if Chugach and ML&P
were allowed to compete with unconstrained retail wheeling, one
might think that it only affects those two utilities. However,
those two utilities also provide wholesale power to other utilities
in the Railbelt area, so it is not just an issue that affects the
two utilities that are being considered.
MR. YOULD related that virtually all of the utilities in his trade
association attended a policy meeting sponsored by ARECA last
November. They considered 11 different options to recommend
pursuing that would help facilitate the question of deregulation
for the state of Alaska. The option adopted was the formation of
a committee composed of legislative and electric utility
representatives to look at the issue and report back its findings
to the Legislature by January 1999. HCR 34, which establishes such
a committee, is currently before the Legislature for its
consideration.
Number 527
ROBERT WILKINSON, General Manager, Copper Valley Electric
Association (CVEA), testifying from the Glennallen LIO in
opposition to passage of SB 355 , stated CVEA is not opposed to
competition, and, in fact, it is the basis of its strategic plan
instituted a couple of years ago. CVEA is actively planning for
competition; competition enters into the decision-making process in
everything CVEA does, but CVEA feels very strongly that in
contemplating passing new legislation that the legislation needs to
be viewed very carefully, and it must be done right. He voiced
support for the formation of a committee to carefully study and
evaluate concerns, not only on behalf of members and rate payers,
but also the utility representatives.
Number 496
NORMAN STORY, Manager, Homer Electric Association, testifying from
the Homer LIO, stated to put into place any act to allow
competition without first considering its long-term effect, not
only in Anchorage, but also on outlying utilities that are
interconnected, would likely jeopardize the serving utilities large
consumer revenues by allowing the large loads to be lost to the
utility. That leaves increased cost for the remaining consumers.
He voiced his opposition to SB 355, but supports the formation of
a committee as provided for in HCR 34.
There being no further witnesses, CHAIRMAN LEMAN closed the public
hearing on SB 355, and directed attention to the proposed amendment
before the committee.
MR. EDWARDS of Chugach Electric Association stated he believes the
amendment is heading in the right direction, but he suggested
deleting the words "before full retail competition." Under CEA's
view of the law, the Legislature has never acted to prohibit
competition, and those words could arguably be construed as doing
that.
SENATOR MACKIE moved the adoption of the following amendment to
include the deletion of the words "before full retail competition."
Amendment No. 1
Page 1, lines 4-11: Delete all material and insert:
"(g) To facilitate the establishment of pilot programs,
electric utilities, power marketers, resellers and aggregators may
request the commission to issue orders necessary to enable the
providing entity the use of the transmission and distribution
facilities of a certificated electric utility for the provision of
retail electric service if the electric utility has more than 30
customers for each mile of distribution line. The commission shall
issue the orders requested within 30 days after receiving the
request. A request under this subsection may include a request for
interim refundable tariffs for distribution access services.
Hearing no objection to the adoption of Amendment No. 1, CHAIRMAN
LEMAN stated the motion carried.
SENATOR MACKIE moved CSSB 355(L&C) be passed out of committee with
individual recommendations. Hearing no objection, it was so
ordered.
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