Legislature(2011 - 2012)BELTZ 105 (TSBldg)
04/07/2011 02:00 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB103 | |
| SB115 | |
| HB24 | |
| HB130 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 115 | TELECONFERENCED | |
| += | HB 24 | TELECONFERENCED | |
| += | HB 130 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 103 | ||
HB 24-EXTEND REGULATORY COMM. OF ALASKA SUNSET
2:24:58 PM
CHAIR EGAN announced HB 24 to be up for consideration [CSHB
24(FIN) was before the committee].
REPRESENTATIVE OLSON, sponsor of HB 24, said it is a sunset
extension of the Regulatory Commission of Alaska (RCA). The
audit came in with an eight-year extension, but the House
Finance Committee cut it back to four years primarily because
there were a few outstanding recommendations. Chairman Pickett
of the RCA has committed to having those finished next year, but
the upcoming FERC TAPS balancing meetings are at the top of his
agenda for the next two and a half months.
SENATOR PASKVAN asked if the House compressed the period of time
before a decision is rendered or were other issues added in.
REPRESENTATIVE OLSON replied that a bill in his committee
addressed timeline issues, but the RCA unfortunately has an open
docket on that particular utility that has been an ongoing
concern for eight or ten years and he didn't think it would be
appropriate for him to hear the bill until after that docket is
closed out.
He added that two years ago, both he and Representative Seaton
had net metering bills with slightly different spins before the
RCA. Within a day of the RCA opening up a docket on net metering
they pulled the bills, but fortunately all the issues were
addressed.
SENATOR PASKVAN said he was trying to figure out the interim
period of time in the 400-plus day process where the Division of
Regulatory Affairs and Public Advocacy (RAPA), Department of Law
(DOL), participates.
REPRESENTATIVE OLSON responded that he was trying to keep a
clean sunset bill.
2:29:23 PM
SENATOR DAVIS said she wanted to hear about the audit.
2:29:51 PM
PAT DAVIDSON, Legislative Auditor, Division of Legislative
Audit, Legislative Affairs Agency, related that they conducted a
sunset review and because the RCA fulfills a public policy need
and serves Alaskans they recommended that the termination date
be extended to June 30, 2019. The prior audit recommended that
RCA develop regulations that would enhance the transparency,
accountability and the efficiency of its decision-making
processes. RCA had partially implemented this recommendation,
but the portion it is still working on is related to developing
the regulations to establish standards for certain aspects of
the discovery process.
In making their eight-year extension recommendation, Ms. Davis
pointed out that there is a new audit requirement associated
with the annual reports of the RCA; in particular Legislative
Audit needs to audit those annual reports every two years.
Included in those annual reports is whether or not the RCA has
met the statutory timelines. This is an opportunity to give the
legislature assurance about whether RCA is meeting its statutory
timeline obligations as well as how they are progressing on
their goals as set up in the Missions and Measures. This is a
way to communicate on a more continual basis with the
legislative with regard to the RCAs activities, which is why
they made the eight-year extension recommendation.
SENATOR DAVIS asked if she still stands by her 2019 date rather
the 2015 date.
MS. DAVIDSON replied that the audit recommended 2019, but it's
always up to the legislature to find its own comfort level in
the extension periods.
SENATOR DAVIS said she wanted to hear from the sponsor about why
they decided on a 2015 extension.
SENATOR GIESSEL asked if Legislative Audit has the authority to
institute the audit of annual reports every two years.
MS. DAVIDSON replied that a bill passed about three years ago
put language in statute for audits of the RCAs annual report to
be done every two years.
2:33:19 PM
REPRESENTATIVE OLSON said he preferred an eight-year extension,
but the House Finance Committee was more comfortable with four
years.
2:34:28 PM
PAT LUBY, Advocacy Director, AARP Alaska, strongly supported HB
24. He said that Alaska needs a regulatory authority that is
independent, fully funded and adequately staffed. The RCA is the
only organization in our state that protects residential and
consumer ratepayers. It's empowered to initiate investigations,
enforce laws and regulations, and his experience with it has
been very positive. They have gone out of their way to have
public hearings in local areas so that the rate paying public
will not have to travel to attend a hearing that deals with
their own utilities. The RCA is the only game in town when it
comes to utility oversight.
SENATOR GIESSEL said when the AARP's letter of support was
written it was for a two-year extension and she wanted to know
if he supported the four-year extension.
MR. LUBY replied that they were actually supportive of the eight
years.
2:36:03 PM
KRISTIN WINTERS, Director, Regulatory Affairs, Golden Heart
Utilities and College Utilities Corporation, stated that along
with their administrative services company, Utility Services of
Alaska, they serve more than 8500 accounts and a population of
more than 50,000 in the greater Fairbanks area. They have been
making these comments many times in past meetings and letters.
They understand that change can be slow, but in the meantime the
absence of change is costly. She said they had filed rate cases
almost annually beginning with test year 1999, again in 2000
with incremental increases approved in 2003 and 2004. They have
filed for test years 2004, 2005, 2006, and 2008 and are required
to file again for test year 2010. The cost drivers behind their
filings have not changed; they still have increasing operating
costs, increasing infrastructure investment needs and their
customer base is not growing. Their neighbor in Anchorage, AWWU,
has testified to the RCA of their need to file rate cases almost
annually, as well, for the very same reasons.
She said they have experienced first-hand the consequences of
regulatory lag resulting from excessively long statutory periods
to resolve rate case filings and they firmly believe that a
reasonable time line for resolution of a rate case is nine
months and that the current process simply expands to fill the
available time.
MS. WINTERS said the rate setting process in Alaska is outdated
and has not evolved to reflect the changing nature of the
utility industry or the rapidly changing economy. According to
the National Association of Water Companies, Alaska's 15-month
statutory timeline in a rate setting filing is the longest in
the nation, and it can be extended as well. Twenty-seven other
states are required to conclude their rate cases in nine months
or less. The length of the entire process is leading utilities
to file "pancaked" rate cases because one case is not resolved
before rapidly escalating costs require a second rate
adjustment. This lag means that the commission has not decided
the disputed issues before the utility files its next rate case.
Thus, in subsequent rate filing, in order to preserve all
rights, the utility includes the disputed issues which then lead
to inefficiencies and increased costs as the parties continue to
debate these undecided issues.
All of this has resulted in rate case costs skyrocketing into
the millions of dollars. For example, circumstance required that
GHU and CUC file a rate case proceeding with the RCA in October
2005 using a required historic test year of 2004. The statutory
timeline of 15 months then started. A final decision was issued
on January 8, 2007 and the resulting approved rates were based
on 2004 costs which no longer reflected current 2007 conditions.
Because of the extreme lag, the utility filed for additional
relief in the meantime in June 2006, which included many of the
disputed undecided issues from the previous case.
2:40:35 PM
She said the excessive length of time to issue an order
determining rates has many negative impacts including increased
costs to the utility and ultimately the rate payer and the
restriction of capital investments to stimulate utility growth
within a community.
MS. WINTERS urged them to support reducing the statutory
timeline for the RCA to issue a final order for a tariff filing
that changes the utilities revenue requirement or rate design
from 450 to 270 days. The commission has stated that the goal of
cost-base rate making is not to cover past costs, but to predict
the rates necessary to yield revenue adequate to cover the
utilities' costs and to provide the opportunity to earn a
reasonable return on investment during the future period when
rates will likely be in effect (from Docket U-05-4344, Order
15). Rapidly rising costs and the need for infrastructure
investment coupled with a statutory timeline of 15 months
precludes the commission from meeting the above stated goal.
MS. WINTERS summarized that this issue is not new and she has
brought it forward many times over the last six years. During
the 2007 legislative session, the RCA chair provided testimony
on HB 209 stating that the RCA considered the issue of reducing
the regulatory lag to be very important and that the RCA fully
intends to move forward on the docket to shorten the timelines
as the public utilities and public advocate recommends. But , it
is now 2011 and the statutory timeline has not been considered
and the issue of regulatory lag has not been resolved. The
continued health of the state's utilities balanced with
providing protection to the ratepayer demands that this issue be
addressed.
2:42:41 PM
SENATOR DAVIS asked if another bill in the House is addressing
this issue.
MS. WINTERS replied yes, but according to Representative Olson,
he does not see forwarding that bill at this time to be
appropriate.
SENATOR DAVIS said she knew one was over there and the Senate
doesn't have one like it.
MS. WINTERS replied there is one in the House but they are
trying this avenue on the Senate side.
SENATOR DAVIS said she thinks this issue is valid and should be
addressed, but she wasn't sure it needed to be in this bill,
because it is just an extension.
MS. WINTERS responded that the purpose of a sunset review is so
issues can be aired and it is in the public's interest and that
of their ratepayers to reduce the costs.
SENATOR DAVIS said she appreciates the fact that she is here
putting the issue before them.
2:45:20 PM
SENATOR PASKVAN asked her to explain the "interim step."
MS. WINTERS replied that the current statutory timeline is now
450 days. The commission typically takes the first 45 days to
review the filing before them and make a determination whether
or not they are going to approve the filing, reject it or
suspend it for further investigation. If they suspend it for
further investigation, interveners (if any) are then asked to
come forward. Typically the Regulatory Affairs Public Advocacy
Group in the Attorney General's Office comes forward and
intervenes in the docket. They are the ones, then, that do the
full review of the filing before the commission. This is where a
majority of the time is taken. A discovery process is followed;
they can ask discovery questions to which the utility has 10
days to reply. Then they file their testimony and make
recommendations. The commission then reserves the last 90 days
of the hearing process to review all of the evidence before them
and make their decision. So, by reducing the timeline from 450
days to 270, the commission would still have the first 45 days
for review and the last 90 days for review of the evidence.
However, the time in the middle would be shortened; this is
where costs can escalate, because as a quasi-judicial process,
they hire attorneys, they carry the burden of proof, they hire
expert witnesses; RAPA hires witnesses as well.
2:48:27 PM
BOB PICKETT, Chairman, Regulatory Commission of Alaska (RCA),
gave a brief overview of the commission saying he would address
previous comments after that. He said they are a five-member
commission, an independent agency in the Department of Commerce,
Community and Economic Development (DCCED). All of the
commissioners are appointed for a six-year term by the governor
and confirmed by the legislature. They regulate utilities and
pipeline companies in the state under AS 42.05, the Utilities
Act, and AS 42.06, the Pipeline Act. they also have other
responsibilities, for example, relating to the Power Cost
Equalization Program (PCE) with the Alaska Energy Authority and
with a wide range of enterprises from electric utilities,
natural gas distribution, water/sewer companies, a variety of
telecommunications. It's fair to say at this point that they
have as many challenges as the APUC or the RCA has ever had.
Some of the major issues before them are looking at $1.5 billion
in capital investment by utilities in the Railbelt, alone. Those
decisions are being made as they sit here; some have already
been made. Over the next 36 months the rate making environment
will be shaped for probably the next 20-30 years, he said, and
that will have a direct impact on ratepayers pocketbooks, the
health of the utilities and many of the issues Ms. Winters
identified. This applies to a variety of other utilities, too.
MR. PICKETT said of all the things before them, the TAPS rate
case is "front and center." There are 12 rate cases currently
with strategic reconfiguration. In 2003 the commission worked
out an MOU with the Federal Energy Regulatory Commission (FERC)
with the idea they would coordinate and consolidate their
proceedings to avoid duplicative expense for the pipeline
carriers to the greatest extent possible. hearings in Washington
D.C. and Anchorage happen this fall and will be quite important
to the future of the TAPS.
He said he didn't disagree with many of the things Ms. Winters
said. He was appointed to the commission in January of 2008, but
he has become familiar with some of the later rate cases. He is
restricted with certain things he can say about a remand from
the Superior Court so he can't get into those details. He
couldn't say that he supports or opposes a reduction of the
statutory deadline from 450 to 270 days or to 280 as some states
have, but he could say that it's important to "unpack" and
identify the reasons for these frustrations and delays.
MR. PICKETT said obviously the RCA is not the only player and
doesn't have total control under the current statutes over all
the moving pieces. They are called to be the final judge and to
balance the interests and contrary to what some folks think,
it's not always the lowest rates that they think about. They are
very concerned with healthy utilities along with just and
reasonable rates; the public has to have confidence in the
process. They are currently involved with discovery regulations
and that's a very interesting process they will be reporting to
the legislature on.
He said from a regulatory paradigm standpoint, the commission
can do some things and it has started an inquiry to look at how
other states handle some of the things that have been litigated
in the past few years to get to where litigation is the last
thing to use. Mediation works in many cases.
Things can change, Mr. Pickett said. When he first came on the
commission, there was an extended period of time where no gas
supply agreements were approved and that was after very
expensive litigation. But over the past couple of years, even in
the tariff period, they have been able to approve five
contracts.
MR. PICKETT said he strongly supported HB 24 and would be happy
to answer questions.
2:54:28 PM
SENATOR MENARD said she was still trying to understand what Ms.
Winters said about the 90 days being the most difficult time and
asked him to argue the point that Alaska has the longest wait
for resolution in the nation.
MR. PICKET replied that that 450 days appears to be the longest
time for resolution in the nation.
SENATOR MENARD said everyone knows that government tends to move
slow and that the RCA had recently lost some long term employees
and realizes that it is reasonable for him to ask for more
people.
MR. PICKET responded that he thinks they have to look at the
regulatory process as a system; there is a 45 day period at the
front end that they are in total control over, then there is the
90-day period reserved for adjudication and writing a "sound
order," but the period in-between would take cooperation of all
the parties and identification of how they are approaching the
public interest - because at the end of the day, the public has
to have confidence in this process.
SENATOR GIESSEL said she appreciates the work the RCA does in
protecting the public and yet at the same time an expedient
regulatory process also protects the public. So she sees that
some balance needs to be achieved. Perhaps his task is too large
and maybe he needs more staff - something they should look at -
with the purpose of protecting the public.
MR. PICKETT responded that staffing is part of it. An RCA task
force several years ago addressed some of the staffing issues.
Unfortunately, those recommendations weren't fully addressed,
but with a new commissioner and deputy commissioner at the
Department of Administration (DOA) he saw some positive movement
and he hoped that would continue. But sometimes it's not just
throwing more people at it; it's stepping back and asking if
what they are doing actually makes sense. In litigation lawyers
strongly influence how the process unfolds and in some cases it
is absolutely necessary. It probably isn't appropriate in all
cases, and he thought they needed to figure out how those things
get sorted out through a rule making process. One of the
commissioners was sent to California last fall to see how they
approach water and sewer utilities and how they can be settled
through arbitration.
2:59:54 PM
SENATOR GIESSEL said she thought California may be the worst
place to go.
MR. PICKETT said he understood her apprehension and had similar
thoughts, but California has some processes for smaller water
utilities that make some sense.
SENATOR PASKVAN said it seems to him that it's the 315-day
interim, RAPA's portion, of the 450 day process that is the
problem and asked what communications have transpired between
him and the Department of Law (DOL) over the years on how to
improve the process from their end.
MR. PICKETT answered that the communication at front end with
RAPA is typically they are invited to participate in certain
dockets of critical public importance. But in a sense if it goes
to suspension, they just become another party in the eyes of the
commission. So, they aren't really communicating. RAPA is
critical and also has staffing constraints.
SENATOR PASKVAN made an "attorney comment." The RCA is the final
decider, but it seems like the 315-day RAPA process is where the
due process component of the entire procedure is played out. The
question is how much due process is appropriate. If the process
is working better elsewhere, that is where Alaska should find a
better way to do that portion of the process.
MR. PICKETT agreed with that, but added that it starts with the
statutes and the regulations that the commission promulgates to
implement those statutes and RAPA has to stay within those
boundaries. It would behoove them "to sort of step back and
look." Last fall they had a series of public meetings with
different industry groups trying to identify specific regulatory
or statutory conflicts. A couple of areas came up, but it was a
little disappointing because people were used to a certain way
of doing things.
SENATOR MENARD said that it's to the detriment of people who are
suffering because the time isn't shortened and that could be
done legislatively.
3:05:14 PM
MR. PICKETT said he thought the sunset is an appropriate time to
discuss these issues.
SENATOR MENARD asked if he supported bill.
MR. PICKETT answered that he supported the part that extends the
commission.
CHAIR EGAN asked if he supported the extension to 2019 if that
happened.
MR. PICKETT replied yes.
CHAIR EGAN said he would hold HB 24 and take it up again at a
later date.
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