Legislature(1993 - 1994)
02/08/1994 01:30 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATOR KELLY introduced SB 213 (ALASKA PUBLIC UTILITIES COMMISSION EXTENSION AND REGULATORY COST CHARGE) to committee and invited the chairman of the commission, DON SCHROER, to testify on the Sunset Hearing. SENATOR KELLY announced there would be a working session at the conclusion of the testimony, to review proposed amendments, and to work on a proposed committee substitute. Number 204 MR. SCHROER read prepared remarks from a document, Sunset Hearing Testimony , and excerpts have been included in the minutes. MR. SCHROER began by expressing support for SB 213 and gave his recommendation for several amendments to the bill. In the General Commission Overview , MR. SCHROER read the A.P.U.C. mission statement, and extended his comments to include elaboration on certificates of public convenience and necessity, pipeline carriers, rates, and terms of conditions of service to the public. He described the membership, budget, and staff of the commission. Under Legislative Recommendations , MR. SCHROER outlined those in a a series beginning with A. Regulatory Cost Charge , in which he suggested the regulatory cost charge should be made permanent, rather than simply extending the repeal date by four years. He explained the Commission's sunset review is adequate to address any problems that might arise in the budget. MR. SCHROER addressed concerns expressed by the utilities, and he used the statute which directs the Commission, to answer the concerns of over-collection. He said the Commission has proposed language to ensure that over-collection of the Regulatory Cost Charge Program (RCC) does not happen, as stated in Section 32 of the Operating Budget, which recommends similar permanent language in AS 42.05.253 and 42.06.285. Number 248 Under B. Power Cost Equalization , MR. SCHROER reviewed the responsibilities of the Commission for setting the electric rates for PCE-eligible utilities, as well as SB 106, which would transfer the power cost equalization responsibility to the Department of Community and Regional Affairs. He referred to a drafting error and explained a revisor's bill had been prepared to correct the error. On to C. Cable Television Regulation , MR. SCHROER explained the Commission has received authority from the Federal Communications Commission to regulate the basic tier of cable utilities currently regulated by the Commission under state law. He also explained a change in statutes would be needed to allow local governments to regulate Cable TV. MR. SCHROER said D. Pipeline Legislative Recommendations would be described in the annual report. Finally, in E. Commission procurement of expert witnesses , MR. SCHROER quoted the Commission recommendations adding an exemption to the Procurement Act, AS 36.30.850, to allow its expert witnesses for cases in a timely manner, and he continued to explain why this has not been previously possible. Next, MR. SCHROER responded to the legislative changes suggested by the Alaska Rural Electric Cooperative Association, beginning with (1) Liberally Construed . He gave the only instance where this phrase is found in AS 42.05.141 in the powers and duties section, which he read to the committee. He quoted a case HEA vs. City of Kenai in which the Supreme Court interpreted the meaning as the actual area in which the A.P.U.C. may exercise its adjudicatory authority as being quite narrow, but allows for broad specific provisions within the narrow authority. He continued to explain the guiding principles to determine the extent of the A.P.U.C.'S jurisdiction to include limitations, restrictions, as well as a principle of expansion. MR. SCHROER reviewed the dealings with this phrase by the Alaska Supreme Court, and in four of the cases the Court found the Commission lacked authority. He described the scrutiny received on this phrase and its authority. Number 296 In (2) The second issue is Negotiated Rulemaking , MR. SCHROER explained, under the Constitution, it cannot mean the delegation of the rulemaking power of the Commission to another body, and he further explained the negotiating group must be treated as a state agency for the purposes of the open meetings and public records act. He expressed concern the process would be slowed further and suggested additional research on the subject. In (3) Lower RCC rates for Electric Utilities , MR. SCHROER read the he response to the Legislative Audit of March 1, 1993, and he quoted the Commission as agreeing the program should be made permanent by deleting the automatic repeal date for the RCC. He said the Legislature switched the funding source for the Commission from general funds to a regulatory assessment, and he explained the Commission's work to assert compliance by affected entities, which he claims is now running smoothly. MR. SCHROER discussed the reasons the Commission could not support the recommendation to require itemization of the rates under the RCC program by utility/pipeline carrier type. MR. SCHROER explained the individual RCC rates would require full and direct allocation of the Commissioner's costs, but the recommendation, if implemented as drafted, would increase the cost of the RCC program. He also explained the burden this would place on the Commission. MR. SCHROER quoted the auditor's recommendation for future refinement of the RCC would require the statutory cap of .61% of the adjusted gross revenues to be substantially increased, and he cited AS 42.05.253(a). If the RCC allocation was altered to reflect the percent of time spent per utility type, he projected the current authorized budget for the Commission would require an increase of the cap to .85% for certain utility groups, which would increase a bill for a utility customer to less than $20 per year. Number 348 Next, MR. SCHROER reviewed III. A.P.U.C.'S Response to the Recommendations of the Legislative Auditor in which the Alaska Public Utilities Commission concurs with the Legislative auditor's findings on public purpose and supports the extension of the sunset date. In A. Regulatory Cost Charge , MR. SCHROER quoted the Commission's opposition to the required re-adjustment of the RCC on an industry by industry basis and explained their response. In B. Easier Access for Utility Consumers to Opt In or Out of Regulations , MR. SCHROER indicated support for the cut-off from $325 thousand to either $500 thousand or a million for economically regulated electric utilities, which would mean that nine more electrical utilities would be able to hold deregulation elections including one local telephone company. MR. SCHROER explained the Commission agreed the C. Timekeeping System was worthwhile to pursue, but he suggested a fiscal note would be required to carry out this recommendation. In D. Commissioner's Access to Adequate Staff Support , MR. SCHROER R explained why the Commission proposed to increase the staff support available for Commissioners on regulatory policy issues, to be done by upgrading one position and creating one new slot to serve as the Commissioners' Policy Analyst. In E. Stagger Commissioner's Terms , MR. SCHROER explained why the Commission supported this statutory change. At this point, he asked for questions. SENATOR RIEGER questioned the different regulatory cost charges for separate industries and asked what would happen if the A.P.U.C. ever got into a big legal battle. They discussed a standard cost spread across all the industries. MR. SCHROER described the process of cost allocation, citing a provision in the present statute and a PC adjustment. Number 417 There being no more questions, SENATOR KELLY called on DAVE HUTCHENS, Director of the Alaska Rural Electric Cooperative Association, (ARECA) to testify. SENATOR KELLY asked MR. SCHROER when the "liberally construed" language passed the legislature, but MR. SCHROER didn't know. MR. HUTCHENS explained the language became part of the A.P.U.C. statute when it was recreated into its present form back in the 1970's, and it became a full time commission. SENATOR KELLY asked MR. FINK to check on the precise time. MR. HUTCHENS quoted his association as being in support of continuing the A.P.U.C., and he cited the same reasons used when it was created in its present form. From the perspective of ARECA, MR. HUTCHENS discussed the value in the diversity of interest between the consumers and the owners who regulate the rates to be fair and reasonable. Another reason, MR. HUTCHENS thought still valid is that electric utilities are very natural monopolies, which can lead to territorial disputes, and someone should assign the service areas. MR. HUTCHENS described the resolution of the long standing dispute between the Chugach Electric Association and the Municipality of Anchorage over where each would serve. He explained this resolve lead to the creation of the A.P.U.C. in its present form, and through the years the A.P.U.C. has resolved territorial disputes. Number 455 MR. HUTCHENS referred to a long standing dispute over service areas overlapping between the Tlingit-Haida Regional Electrical Authority and Alaska Power and Telephone in Southeast Alaska, and he gave some of the particulars in the case. He discussed their exception to a sentence about service areas not being exclusive, and whether they should add some to the sunset review with proposed language to correct a new problem. MR. HUTCHENS explained they had become comfortable with the adequacy of the present law, and he cited a long legislative history to confirm that service areas for ARECA'S to be exclusive. He mentioned it to renew the long history of the law, and he submitted to the committee copies of a letter for the record from Senators Duncan and Zharoff in that regard. The second point to be discussed by MR. HUTCHENS was in relation to the Legislative Audit booklet distributed to the committee members, and he referred to Audit Recommendation #1 to provide a better equity in the manner in which the regulatory cost charge is allocated among the different kinds of utilities. He quoted the specific recommendation for a method of allocating these charges that sounded reasonable and equitable, but the Commission objected as being too expensive to administer. Since the ARECA pays the bills for APUC, MR. HUTCHENS said they have to be sensitive to the costs as well, and he suggested what he considered a simpler way of getting reasonable allocations among the different kinds of utilities. He quoted a solution first proposed by then REPRESENTATIVE BERT SHARP in the House Finance Committee when RCC was originally adopted about three years ago. MR. HUTCHENS explained basically the A.P.U.C. should subtract the cost of power on electric utilities from their total revenues before the allocation was determined, and he explained how the formula could be accomplished with the present accounting system. He claimed there was something wrong with the present formula, and SENATOR SHARP'S plan would be a rough and ready kind of justice that would fix the allocation problem, besides being easy to administer. Number 499 MR. HUTCHENS explained SENATOR SHARP'S proposal from three years ago, saying it would recalculate the regulatory cost charge for electric utility to approximately the same percentage of the work load, or 28%. SENATOR KELLY asked who loses if you assume a neutral revenue to A.P.U.C. Someone would have to go up? MR. HUTCHENS confirmed SENATOR KELLY was correct and explained others would go up, particularly the telephone companies regulated by the A.P.U.C. He said presently the auditor estimates the phone company's share of the work load to be 45%, while they are paying 21% of the RCC. MR. HUTCHENS estimated it would only increase them to 27%. SENATOR KELLY asked what kind of money MR. HUTCHENS was discussing, and MR. HUTCHENS said he had the results from work previously done on the calculations last summer, but not with him. He suggested SENATOR KELLY look in the current auditor's report for the RCC recommendations for some numbers, and MR. HUTCHENS said the total budget of the Commission is on the order of $3.5 million per year, (He was corrected to $3.6 for this year from the audience.) and he said the percentage would change for the utilities from 43% down to 28% of the $3.6 million dollars. SENATOR LINCOLN asked again for the formula to subtract the cost of the purchase of power .... MR. HUTCHENS pointed out two lines on the reports which showed the cost of purchase power, and the other the cost of generation. He told her to subtract the two lines from the total revenues to get the adjusted revenues for calculating the RCC. MR. HUTCHENS launched into his second topic which was also related to the regulatory cost charge, and he quoted Chairman SCHROER as suggesting there should be language added to provide for a true-up at the end of the fiscal year to carry surplus over into the following year. He supported that recommendation for the A.P.U.C. Next, MR. HUTCHENS referred to audit recommendation #4 for adequate staff during dockets when the regular staff is not available to them, and he thought professional staff for the Commission would be appropriate. MR. HUTCHENS also supported the audit recommendation for staggered terms. MR. HUTCHENS said most important from the perspective of the ARECA was the removal of the phrase "liberally construed" from statute and replaced with a test that "the Commission shall have the powers specifically conferred or necessarily implied." TAPE 93-7, SIDE B Number 001 MR. HUTCHENS said MR. SCHROER was correct when he said there hadn't been many cases in the courts where the phrase has been used, but he suggested there were other occasions where the Commission has cited "liberally construed" as defensible authority to take actions that did not result in lawsuits. He said the ARECA thinks the phrase needs to be removed, so it is the Legislature making the decision on the authority of the Commission, not the Commission or the Courts. MR. HUTCHENS said the chairman of the A.P.U.C. was correct that in many cases where the phrase has been invoked, the utilities have benefitted, but he still contends it should be the Legislature's call, only. He gave as an example of the importance as the Healy Clean Coal Project, and he said there was an effort to kill the project by adding a new test by adding environmental externalities into the calculation of feasibility. He said there was no legislative history to suggest environmental externalities should be included in the kind of a case before the A.P.U.C., and he described how it had been turned down by only a 3 to 2 vote. MR. HUTCHENS said the decision might still go the other way in the Court, which is the basis for the appeal from the Commission's order. He reiterated the Legislature should make the call on the authority of the A.P.U.C. SENATOR RIEGER recalled that ATA and Chugach Electric Association came in for some intense oversight from the A.P.U.C., and asked MR. HUTCHENS about the extent of A.P.U.C.'S involvement. MR. HUTCHENS said a number of utilities had very intensive over- sight by the Commission about ten years ago, Chugach Electric Association, perhaps Alaska Telephone Utilities, and for sure, the Alaska Village Cooperative. In answer to a question by SENATOR RIEGER, MR. HUTCHENS thought it just came from their general oversight powers. SENATOR KELLY checked with the Anchorage Teleconference Network to see if JACK RHYNER was still on the line. MR. RHYNER, representing the Alaska Telephone Association, spoke in support for the exemption to the procurement practices and also ask for a waiver for the state hiring practices. Number 055 MR. RHYNER explained some of the tremendous changes in technology experienced by the telephone industry, and he wasn't sure the Commission would have the ability to train their staff on a timely basis for such specialized knowledge, while waiting on a list of people to be hired within the State. He added their support for the removal of the "liberally construed" language and generally agreed with MR. HUTCHENS' testimony. MR. RHYNER also agreed that jurisdiction should be within the authority of the Legislature, and he also supported additional staff for the Commissioners. He referred to a "white paper" presented by the Alaska Telephone Association suggesting the Commission and present staff be separated. He said they had deep concerns about contact between the Commission and staff, with the staff being a party to the docket which blurs the lines on ex parte contact. MR. RHYNER thought the Commission would need accounting and legal staff of its own. He said they would agree with MR. SCHROER about the allocation, and he explained it would amount to about $6.04 for each person in the state for the utilities, but he didn't think customers wanted to be faced with any more costs. Number 098 SENATOR KELLY called on JIMMY JACKSON of GCI in Anchorage, but he had no comments. Next, SENATOR KELLY explained RANDY WELKER, the Legislative Auditor, was available to answer questions from the committee. SENATOR SHARP asked MR. WELKER about the sunset extension, and MR. WELKER referred him to page 5 of the audit report recommending the A.P.U.C. be extended ten years to year,2003, which he said was in keeping with previous work in which the sunset cycle was changed to spread the review process out over a longer review cycle than the current four years. MR. WELKER explained the A.P.U.C. has been one of the most audited Commissions in the sunset process and continued to demonstrate a public purpose and a need. He didn't think matters would change enough to warrant an audit every four years but thought particular circumstances could be handled by a special audit approach through the Budget and Audit Committee. SENATOR KELLY planned to hold the legislation for another time.